VIET NAM MACRO MONITORING April 2025 WHAT’ NEW? • GDP growth accelerated to 6.9 percent (y/y) in Q1-2025, up from 5.9 percent (y/y) in Q1-2024, driven by stronger domestic consumption and investment. • Merchandise exports slowed in Q1-2025 to 10.6 percent compared to 16.8 percent in the same period in 2024, driven by a combination of high base effects and potential slowdown in global demand.1 Additionally, while FDI new commitments declined by 9.2 percent y/y in Q1-2025, reflecting uncertain outlook, FDI disbursements remained resilient, registering $4.9 billion over Q1-2025 (+7.1 percent y/y, similar to Q1- 2024). • Industrial production increased by 8.6 percent y/y in March 2025, compared to 4.8 percent y/y in March 2024, driven by apparel, electronics and machinery. The PMI entered expansionary territory (50.5) in March after three months of contraction, driven by growth in new orders despite high uncertainties. • Total retail sales of goods and services surged by 10.8 percent y/y, marking the highest monthly growth in nearly two years. • Inflation increased to 3.1 percent y/y in March 2025 (+0.2 pp from February) due to rising prices of food and housing, but remains below SBV’s target of 4.5-5 percent for 2025. • Revenue collection for the first three months of 2025 reached 36.7 percent of the State budget’s annual plan compared to 31.7 percent in the same period of 2024, driven by increases in VAT and corporate income tax collection. However, the public investment disbursement rate slowed as of end of March 2025, reaching 9.5 percent of Prime Minister’s annual plan, below the 12.3 percent execution rate from the same period of last year. TO WATCH • Increased global trade policy uncertainty is expected to affect trade and investment in the near term. In particular, FDI new commitments and disbursements may continue to be prudent in the coming months. • Approval of new public investment projects and acceleration of their implementation will be important to support the government’s 8 percent real GDP growth target for 2025. Viet Nam Monthly Macro Monitoring Dashboard Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 Industrial Production (y/y) 4.8% 6.3% 10.0% 12.4% 11.1% 8.4% 10.8% 7.0% 8.0% 8.8% -1.0% 17.6% 8.6% Manufacturing PMI 49.86 50.34 50.28 54.72 54.70 52.43 47.35 51.19 50.79 49.77 48.93 49.25 50.46 Retail sales (y/y) 9.2% 9.0% 9.5% 9.1% 9.4% 7.9% 7.6% 7.1% 8.8% 9.3% 9.5% 9.4% 10.8% Merchandise exports (y/y) 12.9% 11.0% 17.5% 13.2% 20.2% 15.2% 10.8% 10.2% 8.2% 12.8% -4.0% 25.7% 14.5% Merchandise imports (y/y) 9.4% 18.8% 29.9% 14.4% 25.0% 14.7% 11.1% 13.6% 9.8% 19.2% -2.6% 40.0% 19.0% CPI (y/y) 4.0% 4.4% 4.4% 4.3% 4.4% 3.5% 2.6% 2.9% 2.8% 2.9% 3.6% 2.9% 3.1% Core inflation (y/y) 2.8% 2.8% 2.7% 2.6% 2.6% 2.5% 2.5% 2.7% 2.8% 2.9% 3.1% 2.9% 3.1% Ex. rate (VND/USD, y/y) 1.6% 2.2% 2.5% 2.2% 2.1% 1.6% 0.6% 0.4% 1.1% 1.5% 1.9% 2.4% 3.3% FDI disbursement (YTD, y/y) 7.1% 7.4% 7.8% 8.2% 8.4% 8.0% 8.9% 8.8% 7.1% 9.4% 2.0% 5.4% 7.1% Credit growth (YTD, y/y) 12.5% 12.7% 14.0% 15.3% 15.3% 15.7% 16.1% 16.7% 16.6% 15.1% 16.5% - - Source: Haver Analytics, GSO. Note: Color scale represents value percentile across months from March 2024 to March 2025. 1 This monthly note covers the period from February 28, 2025 to March 31, 2025, prior to new US tariffs announcement on April 2nd, 2025. 1 VIET NAM MACRO MONITORING April 2025 Economic activity accelerated in the first quarter of 2025, indicating a robust economic performance. Viet Nam's real GDP growth rose to 6.9 percent y/y in Q1-2025 from 5.9 percent y/y in the same period of 2024 (Figure 1). This acceleration was driven by increased consumption and investment, which grew 7.4 and 7.2 percent y/y, respectively. Exports decelerated, driven by a combination of high base effects and potential slowdown in global demand. The growth of merchandise exports slowed in the first quarter of 2025 to 10.6 percent compared to 16.8 percent in the same period in 2024 (Figure 2) as growth of computer and electronics exports (35 percent to 29 percent) and phones exports (5 percent to -0.8 percent) moderated. These products jointly represented a third of total exports in 2024. Meanwhile, imports grew 16.9 percent y/y compared to 14.1 percent in the first quarter of 2024, to meet the increased industrial production demand. Consequently, the trade surplus more than halved to $ 3.2 billion in Q1-2025, compared with $ 7.7 billion in Q1- 2024 (Figure 2). Figure 1. GDP growth (percent, y/y) Figure 2. Merchandise exports 20 10 30 15 20 5 10 6.9 10 Percent $US billion 5.9 5 0 0 -10 0 -5 -20 -5 -10 -30 2021 2022 2023 2024 Q1-24 Q1-25 Investment Final consumption Exports Imports GDP Growth Balance Exports (fob) (RHS) Imports (cif) (RHS) Industrial production improved and the PMI expanded in March 2025. The Industrial Production Index (IIP) increased by 8.6 percent y/y in March 2025 (Figure 3),2 compared to 4.8 percent y/y at the same period last year, driven by apparel (+16.8 percent y/y), electronics (+11.2 percent y/y) and machinery (11.3 percent y/y). The PMI was up from 49.2 in February to 50.5 in March (Figure 4), signaling an improvement in business conditions at the end of the first quarter of 2025 amid slight increases in outputs and new orders, in a context of global trade policy uncertainty. 2 Statistics for January and February are impacted by the timing of the Lunar New Year holiday (Tet). In 2025, Tet holiday was in January (versus February in 2024), resulting in four fewer working days during the month. Industrial production decreased by 1.1 percent (m/m, SA) in January 2025 and surged by 8.3 percent (m/m, SA) in February 2025 as the Tet holiday in 2025 took place in January 2025. 2 VIET NAM MACRO MONITORING April 2025 Figure 3. Industrial production (percent) Figure 4. Manufacturing PMI index (SA, 50+ = Expansion) 20 55 10 expansion 50 0 contraction -10 45 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Month-on-month (SA) Year-on-year Viet Nam Global ASEAN While FDI disbursements remained resilient, FDI new commitments declined, reflecting uncertain outlook. The FDI new commitments declined by 9.2 percent y/y, from $4.8 billion in Q1-2024 to $4.3 billion in Q1-2025 (Figure 6), as top investors remained prudent given heightened uncertainty around possible global trade policy shifts. Commitments from Hong Kong (-63 percent), Korea (-58 percent) and Singapore (-42 percent), which were among the top countries for FDI commitments, fell, while mainland China commitments surged by 156 percent y/y from a low base. Figure 5. FDI disbursement Figure 6. FDI new commitments $ 4.8 bn 7.1% 7.1% (+38%) $ 4.3 bn ($ 4.6 bn) ($ 4.9 bn) (-9.2%) 3M-2024 3M-2025 3M-2024 3M-2025 Singapore Korea China Hong Kong Japan Others 3 VIET NAM MACRO MONITORING April 2025 Domestic consumption improved amid positive wage growth. Retail sales of goods and services surged by 10.8 percent y/y, marking the highest monthly growth in nearly two years (Figure 7). Average monthly income rose by 9.5% (to VND 8.3 million) in Q1-2025 compared to Q1-2024, leading to a 6 percent real wage growth. The consequent improvement in workers’ purchasing power has supported domestic consumption growth. Figure 7. Retail sales (percent) Figure 8. Inflation (percent, percentage points) 15% 10.8% 6 3.1 10% 4 5% 2 0% 0 -5% -10% -2 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Food Housing Transport Health & edu. Month-on-month (SA) Year-on-year (NSA) Headline Core Inflation picked up in March 2025 but remains within inflation target3. Both consumer price index (CPI) and core inflation climbed 3.1 percent y/y in March 2025 compared to 2.9 percent y/y in February, driven by food and housing prices and partly offset by transport costs (Figure 8). The SBV raised the inflation target to 5 percent for 2025 from 4-4.5 percent in 2024. The exchange rate remained relatively stable, while the SBV raised the central rate and supported the currency. The VND depreciated by 3.3 percent y/y as end of March 2025 (+0.9 pp from February). The SBV gradually raised the central exchange rate in consecutive sessions by 508 VND over the first three months of 2025, marking a significant adjustment compared to 77 VND in the same period in previous years (Figure 9). The continuous depreciation in the central rate has also pushed the ceiling rate higher, providing room for market adjustments. To ensure an orderly depreciation, the SBV drew down its foreign reserves from $79.2 billion in December 2024 to $78.2 billion or about 2.4 months of imports as end of February 2025 (Figure 10). 3 Resolution No. 192/2025/QH15 dated February 19, 2025 has increased the target of inflation by 50 bps compared to the initial plan (Resolution 158/2024/QH15 dated November 12, 2024), i.e. the CPI can go up to 5 percent in 2025. 4 VIET NAM MACRO MONITORING April 2025 Figure 9. Exchange rate (VND/USD) Figure 10. Foreign reserves 26,000 95 4.0 3.5 90 3.0 Months of imports 25,000 2.41 85 2.5 $ billion 24,000 $78.1 2.0 80 billion 1.5 23,000 1.0 75 0.5 22,000 70 0.0 Mar-23 Sep-23 Mar-24 Sep-24 Mar-25 Q1-23 Q3-23 Q1-24 Q3-24 2M-25 Stock of foreign reserves Central rate Market rate Months of imports (RHS) While revenue collection improved, public expenditure slowed. Revenue collection for Q1- 2025 reached 36.7 percent of the annual plan compared to 31.7 percent in the same period of 2024, driven by increases in VAT and corporate income tax collection. Total expenditure was only 11.6 percent higher than Q1- 2024 and equivalent to 16.8 percent of the plan. Recently, the government announced a plan to increase public investment in 2025 by 37.7 percent compared to 2024 disbursement (+0.7ppt of GDP) to achieve the growth target of 8 percent this year. However, implementation remains a major challenge when the public investment disbursement rate as end of March 2025 was 9.5 percent of Prime Minister’s plan compared to 12.3 percent in the same period of last year. Sources and notes: All data are from Haver and sourced from the Government Statistics Office (GSO) of Viet Nam, except: Government budget revenues and expenditures (Ministry of Finance); PMI and producer price inflation (survey by Nikkei and IHS Markit; Purchasing Managers' Index is derived from a survey of 400 manufacturing companies and is based on five individual indexes on new orders, output, employment, suppliers’ delivery times (and stock of items purchased). It is seasonally adjusted. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change). Retail sales of goods and services are total turnover generated from retailing consumer goods and services of production and business establishments. Real income growth is the nominal growth of average monthly earnings of workers after adjusting for inflation. SA=Seasonally Adjusted; NSA=Not Seasonally Adjusted; LHS = Left-hand Scale; RHS = Right-hand Scale; FOB = Free on Board; CIF = Cost, Insurance, and Freight. 5 VIET NAM MACRO MONITORING April 2025 Selected Economic Indicators Oct- Nov- Dec- Jan- Feb- Mar- Q1-24 Q2-24 Q3-24 Q4-24 Q1-25 24 24 24 25 25 25 GDP (in percent y/y, unless otherwise indicated) Real GDP growth 6.0 7.1 7.4 7.6 6.9 Final consumption 4.9 - 7.0 7.5 7.5 Investment 4.7 - 7.1 8.0 7.2 Exports 18.0 - 15.7 11.4 9.7 Imports 17.1 - 15.8 13.5 12.5 Agriculture 3.5 3.8 2.9 3.0 3.7 Industry and Construction 6.8 8.6 9.0 8.4 7.4 Services 6.2 7.4 7.5 8.2 7.7 Nominal GDP (Billion US$) 103.5 110.0 115.9 130.7 110.5 Production Industrial Production (y/y) 5.9 9.9 9.3 7.9 7.8 7.0 8.0 8.8 -1.0 17.6 8.6 PMI (Index, SA) 51.2 50.8 49.8 48.9 49.2 50.5 Domestic demand Retail sales (y/y) 8.4 9.1 8.5 9.3 9.9 7.1 8.8 9.3 9.5 9.4 10.8 Price Headline CPI 3.8 4.4 3.5 2.9 3.2 2.9 2.8 2.9 3.6 2.9 3.1 Core inflation 2.7 2.8 2.9 3.1 2.9 3.1 Labor market Labor force participation rate (percent) 68.5 68.6 68.6 69.0 68.2 Unemployment rate (percent) 2.2 2.3 2.2 2.2 2.2 Underemployment rate (percent) 2.0 2.1 1.9 1.7 1.7 Employment change (y/y) 0.3 0.4 0.5 1.2 1.0 Average monthly earnings of workers (Million VND) 7.6 7.5 7.7 8.2 8.3 State budget (Trillion dong) Revenue 539.5 481.1 427.6 524.4 657.5 178.5 139.4 206.5 275.9 191.9 189.7 Expenditure 393.5 410.1 452.6 610.1 423.1 155.4 170.8 283.9 134.4 140.6 148.1 Balance of payments (in percent of GDP. unless otherwise indicated) Current account 6.5 4.5 7.6 5.7 Exports f.o.b 89.8 89.5 93.4 81.0 Imports f.o.b 78.4 81.6 81.6 74.2 Capital and financial account 1.1 -6.6 -1.8 0.2 Foreign reserves (Billion US$) 89.1 82.9 82.3 79.1 Financial indicators Policy rate (Refinancing rate) 4.5 4.5 4.5 4.5 4.5 4.5 Credit growth (y/y) 16.7 16.6 15.1 16.5 - - Source: GSO, MOF and Haver Analytics, 6