VINACHEM

Singapore-based United Overseas Bank (UOB) has lowered its forecast for Vietnam’s GDP growth to 6% this year from its previous 7.0 projection due to the significant downside risks of tariff measures imposed by the United States.

According to the bank’s latest report, experts are pegging their growth projections for the second and third quarters of the year at 6.1% and 5.8%, respectively.

Under these conditions, both the realised FDI and registered FDI could back towards the US$20 billion level this year.

Growth pace moderated in Q1

Real Vietnamese GDP in the first quarter of the year slowed to 6.93% year on year, from the 7.55% expansion recorded in the fourth quarter last year.

This is slightly below experts’ consensus median forecast of 7.1%. The slower pace is partly due to festive season of the Lunar New Year holiday, as factory activity moderated during the quarter while exports momentum picked up.

Manufacturing output slowed to 9.3% from 9.97% recoded in the fourth quarter last year. While the latest Manufacturing Purchasing Managers' Index PMI data suggests that the local manufacturing sector is returning to expansion zone in March after three straight months contraction, the data may be put to a severe test after the announcement of the reciprocal tariff by US President Trump on April 2.

Overall services sector moderated to a 7.7% pace from 8.2% in Q4 last year, but still the second quickest increase in the past nine quarters.

In the first three months of 2025, exports increased by 10.6% year on year to US$102.8 billion, while imports jumped by 17%, resulting in a trade surplus of US$3.1 billion, well below the surplus of US$7.8 billion in the same period in 2024.

The US continued to be the largest export market, accounting for about a 31% share of the total, followed by China at 12.8% and the Republic of Korea at 7%.

Total registered foreign direct investment (FDI) into Vietnam hit nearly US$10.98 billion in the first quarter, up 34.7% year on year, while realised FDI rose 7.2% to US$4.96 billion in the reviewed period.

Challenges ahead

Despite a respectable GDP report in Q1, what markets are focusing on is the surprisingly large 46% reciprocal tariff slapped against the country by US President Trump. While there are efforts underway to negotiate with the US, the outcome remains uncertain.

With such high tariff rate, Vietnamese companies now face the real risks of declines occurring in exports orders as US consumers react to higher prices by cancelling or delaying their purchases, or even considering domestic alternatives as price differentials narrow.

The National Assembly of Vietnam had previously set a growth target of 6.5% to 7.0% for 2025, while the government has maintained “at least” an 8% of expansion this year.  – Source: VOV