UBS Economics-APAC Economic Perspectives _Vietnam when there is a will, t...-117572298

ab1 September 2025Global ResearchAPAC Economic PerspectivesVietnam: when there is a will, there is a way GDP projection upgrade to 8% We revise up Vietnam’s GDP growth projection to 8.0%, against the current Bloomberg consensus expectation of 6.5% and our previous projection of 6.4%. This new forecast brings us to the top of consensus. Vietnam recorded one of the fastest growths in Asia in 1H25, supported by dual strength in domestic and external demand. Despite the trade deals, Vietnam’s export growth may face some downward pressure ahead as the much higher tariff level starts to weigh on global trade. However, we expect domestic growth engines to strengthen further to drive further growth accelerations ahead. Infrastructure investment to lead, more contribution from the property sector The government recently lifted the 2025 growth target to 8.3-8.5% and commenced a large amount of new construction projects. The central bank has announced a 50% reduction in reserve requirements for some large banks. Vietnam's public debt-to-GDP ratio has declined over the past years to 34% at the end of 2024—well below the legal debt ceiling of 60%, and significantly lower than both the ASEAN-5 average and the EM Asia average. Backed by strong government commitment and a more efficient project approval process, the SBV’s measures to provide more funding support and ample fiscal space, we expect robust infrastructure investment momentum to remain a key pillar of GDP growth in the coming quarters. While property market new launches and sales remained weak, we noted regulatory bottlenecks being resolved, we observed faster administrative approvals and commencements of construction. Given the large gap in supply from previous years and the demand underpinned by strong income growth, we expect more growth contribution from the property sector in both real estate services and related downstream consumption. While small in size, we also expect the cash handout during the national day (approximately 0.1% of GDP) to offer support to public confidence. Symmetry transshipment tariff could bring opportunity to VietnamThe 40% US tariff on transshipments, first announced in the US-Vietnam trade deal, is symmetrically applicable to all economies facing reciprocal tariffs. Given that the US and Vietnam began cooperating to tackle transshipment in 2019 during President Trump's first term, the fact that a series of anti-circumvention investigations have been completed in some sensitive product categories, the Vietnamese government's ongoing efforts to address transshipment, as well as the leading role of large international corporations in Vietnam's exporting sector, we believe the incremental impact from the transshipment tariff on overall exports should be relatively limited. Increasing local value added is positive for the economy, spurring investment, job creation, and potential technological spillover. Vietnam has been one of the most popular destinations for