News and Insights

In July, Vietnam’s economy sustained its growth trajectory, driven by a strong performance in the manufacturing sector, robust export activity and consumption recovery. The government has officially set a revised economic growth target of 8.3 – 8.5% year-over-year (YoY) for 2025. With considerable potential for increased public investment and increase in the credit growth quota in the second half of the year, achieving this target seems feasible.

Manufacturing maintained strong momentum, posting an increase of 9.3% YoY in July and 10.3% YTD, supported by a 3.9% YoY expansion in sector employment. Electricity generation grew 7% YoY, underscoring a recovery in industrial activity. The PMI improved to 52.4 in July (June: 48.9), back above the 50.0 threshold for the first time in four months, as renewed orders supported a faster rise in production and employment neared stabilization. Exports continued to be resilient and advanced 16% YoY in July and 14.6% YTD, with the trade surplus reached USD 10.2bn. FDI remained strong, signaling strong investor confidence despite trade policy uncertainty. FDI disbursements increased 8.4% YoY to USD 13.6bn in 7M25 (7M24: USD 12.6bn), while newly registered and additional commitments increased 27% YoY to USD 24.1bn. With robust FDI inflows, solid export performance, and improving clarity on tariff policy, we maintain a constructive outlook for manufacturing in the latter half of 2025.

Public investment has showed more resilience than expectations, demonstrated a key driver for growth. In the first seven months of 2025, disbursements reached 43.9% of the full-year target, a significant improvement compared to 33.8% during the same period last year. In July alone, around VND 70 trillion (USD 2.66 billion) was disbursed, pushing year-to-date disbursement up 63% YoY. Importantly, the recent provincial mergers have not disrupted the investment pipeline. On the contrary, local authorities have demonstrated stronger execution capacity than the central government, achieving a disbursement rate of 57.5%, reflecting their responsiveness and implementation efficiency.

Consumption showed strength, with retail sales increasing by 9.2% YoY in July and 9.3% YoY for the first seven months of 2025 (7M24: 8.9% YoY). Real growth remained positive at 7.1% YoY (7M24: 6.2% YoY). Service consumption continues to outperform at 15% YoY and tourism up 20% YoY, while international arrivals also up +22.5% YoY (125% of pre-pandemic level).

Inflation remained well-contained. July CPI rose 0.11% MoM and 3.19% YoY, with the YTD average at 3.26% YoY. The slight MoM increase was attributed to accommodation and construction materials (+0.36%), reflecting temporary construction material input shortages and higher electricity usage amid the summer peak. Inflation expectations are anchored by (i) softer global commodity prices; (ii) abundant domestic food and foodstuff supply; (iii) lower education costs, including tuition waivers; and (iv) tax relief such as VAT and environmental-protection tax cuts.

The Vietnamese Dong slipped a further 0.3 % MoM In July 2025 (or -2.8 % YTD), while the SBV continued to lift its daily central rate. This mild depreciation occurred despite a 3.3 % MoM rebound in the DXY (or -7.8 % YTD), thanks to persistently tight VND liquidity throughout the month. The overnight interbank rates averaged nearly 5% for most of the month before easing to 3.4% on 31 July. Rapid credit expansion tightened system liquidity, prompting smaller banks to raise deposit rates by 10-20bps. In response, the SBV injected VND 86.2tn via open market operation, pushing outstanding OMO balance to VND 206.9 tn—the highest since January 2017, with 14-day term making up roughly 60% of the total loan balance. We expect USD/VND to remain under mild pressure through 3Q 2025, then stabilize in 4Q 2025 as FDI and portfolio inflows are expected to strengthen on the back of a potential market-upgrade announcement and greater clarity on U.S. tariff policy.

The VN-Index advanced 9.2% MoM in July and 18.6% YTD to close at 1502.5, capping one of the strongest three-month rallies. Average daily trading value increased remarkably 67.2% MoM to USD 1.3bn and total market turnover surged to USD 3.1bn on July 29, setting a new single-day record high. Foreign investors switched to net buying, accumulating USD 343mn in July after selling USD 1.57bn in the first half of the year. The rebound was supported by clearer U.S. trade-policy, Vietnam’s relative advantage in global manufacturing, and foreign investors’ early positioning for a potential reclassification-upgrade wave. In contrast, retail investors took profits, resulting in USD 288mn of net outflows for the month.

July’s gains were broad-based but led by Financials, Real Estate and Industrial sectors. Brokerages outperformed on surging liquidity and conviction towards market upgrade, while banks rallied on robust credit growth and the SBV’s Circular 14/2025 introducing Basel III capital buffers—another step toward phasing out credit-room ceilings. Real estate sentiment improved thanks to more clarity on personal income tax policy for real estate transaction as well as ongoing government efforts to resolve legal bottlenecks. Foreign flows favored SSI (USD 133mn), VPB (USD 57mn) and SHB (USD 52mn), while VJC (USD 77mn), HPG (USD 26mn) and VCB (USD 26mn) were top selling. The VN-Index trades at 14.5x trailing P/E—near the 3-year average yet well below the 16.7x 5-year mean. The trend remains constructive, though a modest pullback would be healthy for consolidation and to attract fresh capital. We believe in the market’s medium and long-term outlook given Vietnam’s resilient macro and corporate fundamentals.