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Vietnam’s Economy in May: Unpacked

Last Friday, the National Statistics Office (NSO) released its May economic update. 

For the most part, the data was on trend, however, it comes amidst broad trade uncertainty and a generally hazy global economic picture. 

Against this backdrop, this article breaks down the key data points and policy factors that shaped Vietnam’s economic landscape in May.

Policy developments

Vietnam to stay the course on 8 percent growth target.

At the beginning of May, in a report delivered to the National Assembly, Prime Minister Pham Minh Chinh outlined a sweeping economic agenda centred on sustaining growth and diversifying markets. 

More importantly, however, he made clear the government’s intentions to maintain its growth target of 8 percent for 2025, even as it faces rising trade tensions with the US. 

Trade negotiations with the US continue.

On that note, the Government of Vietnam continued to open up a multi-pronged defensive strategy against pending US tariffs. 

It negotiated the import of agricultural products to the tune of US$2 billion, launched a crackdown on the sale of counterfeit goods, held a groundbreaking for a Trump branded golf course, floated the idea of a Trump Tower in Ho Chi Minh City, and reportedly hired international consultants to help woo the Trump administration.

That said, it’s still not clear what, if any, impact this might be having.

Private sector development is put front and centre.

The National Assembly passed Resolution 68, which set out ambitious growth targets for Vietnam’s private sector. 

It also passed Resolution 198, to support Resolution 68, which provides land rent subsidies, interest rate support, tax exemptions, inspection limits, and legal protections for private enterprises, SMEs, and startups.

However, early attempts to treat state-owned enterprises and private enterprises equally have proved difficult. 

At the end of April, Vietnam Airlines was given the green light to buy aircraft without a government guarantee. 

Just a few weeks later, however, it was announced that a government guarantee might be necessary after all (presumably organising financing without government backing was a challenge).

That is to say, the aims of Resolution 68 will be significantly disruptive to the status quo and, as such, challenging to realise.

A privately funded stimulus package was announced.

A total of 21 commercial banks reportedly signed on to participate in a VND 500 trillion (US$20 billion) credit package to support businesses in infrastructure and digital technology development, according to Deputy Governor of the State Bank of Vietnam, Dao Minh Tu.

The package is set to offer interest rates at least 1 percent lower than current commercial lending rates for a minimum of two years.

It is also said to be fully funded by commercial banks with no state budget or foreign loans involved. 

The announcement, coming from the State Bank, should also double as a reminder of the non-market policy drivers in the banking and finance sector.

Macroeconomic factors

Public investment languished.

By the end of May, just 24.3 percent of allocated government investment funds had been spent. 

This is problematic in that government spending has been seen as key to reaching 8 percent growth this year.

It might also suggest there will be challenges executing a government-funded stimulus program, should one be pursued in response to a possible global economic downturn.

The dollar continued to strengthen against the dong.

The US dollar fell .82 percent in May, per the DXY index, compared to April, but increased by .68 percent against the Vietnamese dong, according to the NSO. This put the VND at odds with most of its regional peers.

Source: Google Finance

The NSO has said this is due to increased demand for US dollars to pay for imports. 

However, it was also reported in May that the State Bank has been making foreign currency purchases since the start of the year, collectively valued at US$1.6 billion as of May 21.

The State Bank has also been pumping money into the economy through open market operations.

Inflation ticked upward.

Vietnam’s consumer price index was up 0.16 percent month-on-month in May and 3.24 percent compared to May last year.

This is slightly below the 12-month average of 3.28 percent. However, excluding January, in which spending was up in anticipation of the Lunar New Year in February, it is the highest it has been since August.

Housing, electricity, water, fuel and construction materials made the biggest contribution, collectively accounting for .14 percentage points in the CPI increase overall.

This was in large part driven by state-set power prices being increased by an average of 4.8 percent on May 10.

Of note, power prices were left unchanged for several years. This helped to keep the CPI suppressed, but led to electricity being sold below cost and the state power provider incurring huge debts. Prices now appear to be playing catch-up, and subsequently so is inflation.

Manufacturing

S&P Global’s Purchasing Managers’ Index (PMI)

S&P Global’s PMI for Vietnam rose to 49.8 in May from 45.6 in April, remaining below the 50-point threshold which signals the sector is still in contraction. It is, however, still a notable improvement after that significant drop a month earlier.

It’s also up on its six-month average – 48.8 points – which could be read as cautious optimism, however, it could also be read as a sign that sentiment in the sector wasn’t doing too well even before the “reciprocal” tariffs were announced.

Vietnam’s Index of Industrial Production (IIP)

Meanwhile, NSO data, specifically, Vietnam’s IIP reflected continued growth in output. It rose 4.3 percent month-on-month and 9.4 percent year-on-year.

This is a little up on its six-month average – 8.8 percent –  which might reflect a scaling up of production to fill orders ahead of the “reciprocal” tariffs slated to come online July 9.

Trade

Total trade

Vietnam’s total import-export turnover in May reached US$78.64 billion, up 5.8 percent month-on-month and 15.5 percent year-on-year

Year-to-date, this took total trade to US$355.79 billion, up 15.7 percent compared to the first five months of 2024.

Vietnam-USA trade

The strong growth in trade in May for Vietnam was reflected in significantly increased exports to the US, which jumped by 14.43 percent over April.

Incidentally, this brought Vietnam’s trade surplus with the United States to US$12.16 billion, up 16.32 percent from April.

In light of Vietnam’s trade surplus being a key point of contention for the Trump administration, this is not necessarily good news.

What to watch in June

With about a month to go before the July 9 deadline to make a deal with the Trump administration, with respect to tariff arrangements, June will likely be an anxious wait for export-dependent businesses.

That said, it can take a few weeks to a month to ship a container of goods from Vietnam to the US, so the cutoff to beat the tariffs will likely be somewhere around mid-month.

This may see greater pressure on the local currency as US dollar payments slow.

Also, the aforementioned electricity price hike only took effect on May 10, so the impacts should flow through into June’s CPI readings.

All of that said, 2025 has been crystallised by uncertainty and unpredictability, which is to say, anything could happen between now and the end of June.

Of note: If you’re looking for an in-depth assessment of anything to do with the business environment in Vietnam, I do take commissions and I am always open to collaborate. You can reach me on LinkedIn – Mark

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