News and Insights

• Vietnam’s growth remains solid, but the composition is shifting. The economy is becoming more domestically driven, investment-led, and increasingly influenced by policy execution and cost pressures.
• Inflationary pressures mostly came from continued strong first-round impacts of higher elevated oil prices, particularly on housing & construction materials basket, emerging second-round effects in key categories, namely food & foodstuff, beverages & cigarettes, household equipment & appliances.

• Following a sharp correction, the VN-Index staged an impressive rebound in April, surging more than 10% (nearly 180 points) to close the month at 1,854.10 points, although much of the gains relate to vingroup stocks.

 

Vietnam’s manufacturing and export sectors demonstrated solid growth in April 2026, though the underlying composition is shifting toward a more balanced, domestically driven cycle. Industrial Production (IIP) expanded by 9.2% year-over-year in the first four months (4M26), with April seeing a 9.9% increase, driven heavily by manufacturing. The industrial cycle is broadening beyond its traditional reliance on export electronics—which still saw strong tech dominance with computer and electrical exports surging 49.1%—into cyclical, domestically linked sectors like chemicals (+20.6%), metals (+18.7%), and construction materials (+17.9%). On the trade front, April exports hit USD 45.4 billion (+21.0% YoY), bringing 4M26 export growth to 19.7%. However, this performance remains heavily skewed toward the foreign direct investment (FDI) sector, which grew 29.2% in April while domestic-sector exports declined by 4.2%. The trade balance recorded a USD 3.3 billion deficit for the month (USD 7.1 billion for 4M26). Rather than signaling lost competitiveness, this deficit is a byproduct of the current investment phase, driven by a 28.7% surge in imports concentrated in capital goods and intermediates. Still, emerging headwinds warrant attention; April's Purchasing Managers' Index (PMI) indicated the first decline in new orders in eight months as rising transport and input costs began to constrain demand.

 

Investment remains a vital dual engine for the economy. Public investment disbursement rose 10.4% YoY to USD 5.8 billion, reaching 19.7% of the annual plan, with early signs of improved local execution. FDI continues to reinforce the cycle. In 4M26, FDI registrations surged 32.0% year-over-year to USD 18.2 billion—led predominantly by Singapore (40.3%) and South Korea (26.1%)—while disbursed FDI rose a solid 9.8% to USD 7.4 billion. This constructive combination of public and foreign capital highlights that the broader economic cycle remains firmly intact.

 

On the consumption front, retail sales present a picture of resilience, though underlying momentum remains moderate rather than accelerating. Total retail sales of goods and services grew by 11.1% year-over-year in 4M26 (translating to roughly 6.3% in real terms), with April posting a slightly stronger 12.1% increase. This stability is heavily supported by a robust recovery in the services and tourism sectors; accommodation and catering services grew by 13.4%, and tourism revenues increased by 12.1%. A significant driver of this services rebound is the influx of international visitors, which surged 14.6% year-over-year to 8.8 million in the first four months, including 2.0 million arrivals in April alone (+22.8% YoY). However, despite the recovering service sectors, broader household demand is being visibly constrained by rising living costs, preventing a more decisive and widespread rebound in domestic consumption.

Inflation is rapidly emerging as a complex challenge, with building pressures signaling that risks are no longer benign. Headline CPI averaged 3.99% year-over-year in 4M26—nearing the State Bank of Vietnam’s 4.5% target—but April saw a sharp acceleration to 5.46% YoY (+0.84% MoM), reaching its highest level since January 2020. These inflationary pressures are increasingly linked to the investment cycle and elevated global commodities. Housing and construction-related costs jumped 2.59% month-over-month, fueled by a 35.3% surge in gas prices alongside rising material and utility expenses. The price increases are also broadening, with 10 out of 11 CPI categories moving higher. Second-round effects are now visible in food, beverages, and household appliances. With core inflation rising from a 3.89% average to 4.66% in April, there is a clear, gradual pass-through of costs that demands close monitoring as the macro environment enters a more nuanced phase.

In April 2026, banking system liquidity pressures eased from early-month highs following a net injection of VND 19.5 trillion via Open Market Operations (OMO) by the State Bank of Vietnam (SBV). This intervention pushed the month-end OMO outstanding balance to VND 310 trillion and successfully cooled the overnight interbank rate to 6%, down from a peak of 9% earlier in the month. On the interest rate front, March data showed average deposit rates rising 0.1–0.3% month-on-month (up 0.2–0.9% year-to-date), alongside a 0.2–0.3% increase in average lending rates. To counter this trend, commercial banks agreed to lower deposit rates following an April 9 meeting with the new SBV Governor. However, these cuts remain localized. The room for broader rate reductions is still heavily constrained by structural imbalances, rising funding costs, and ongoing pressures from global geopolitics and major central bank policies. Notably, despite these complex domestic monetary conditions and a substantial April trade deficit of USD 3.3 billion, the USD/VND exchange rate has remained impressively stable, recording only a marginal 0.2% increase year-to-date.