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UOB maintains positive outlook for Vietnam but risks lie ahead

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The United Overseas Bank (UOB) has maintained its full-year growth forecast for Vietnam at 7 per cent in 2025, assuming first quarter growth of 7.1 per cent.

Positive momentum of the economy to continue but with risks ahead

For 2026, the bank anticipates the expansion pace to step up to 7.4 per cent, benefitting from the government’s efficiency drive.

With surprisingly strong performances in three straight quarters, Vietnam’s economy expanded 7.09 per cent in 2024 from 5.1 per cent in 2023, beating the consensus call of 6.7 per cent and official target of 6.5 per cent. This was the best showing since the post-COVID rebound in 2022 (8.1 per cent).

The manufacturing and services sectors were the main drivers of activities in the last quarter of 2024, while external trade maintained a strong pace through most of 2024. The upswing in semiconductor sales since mid-2023 also boosted exports.

Export activities expanded for the 10th month in 2024, registering a full-year gain of 14 per cent, and reversing the 4.6 per cent contraction in 2023. Imports rose 16.1 per cent in 2024 to deliver Vietnam’s second-largest trade surplus of about $23.9 billion, following the record high of $28.4 billion in 2023. This is the ninth consecutive year that Vietnam has registered an annual trade surplus, which will be helpful in anchoring the VND exchange rate, UOB affirmed in the report released on March 12.

Vietnam’s heavy dependence on international trade is reflected in the roller coaster ride of economic growth over the 2023-2024 period, when falling exports in 2023 caused a significant slowdown to the headline GDP. The boom in exports in 2024 resulted in its strongest economic performance since 2022. Vietnam’s export value was about 90 per cent of GDP in 2024, the second highest in ASEAN after Singapore’s 174 per cent and ahead of third-placed Malaysia’s 69 per cent.

This high degree of openness means that Vietnam is vulnerable to disruptions and frictions in international trade, especially with US President Trump’s focus on trade imbalances. Overall, the US trade deficit with ASEAN nearly tripled to $228 billion in the same period as global trade flows and supply chain shifts accelerated in response to trade restrictions implemented in the Trump 1.0 era.

Vietnam’s National Assembly has raised the country’s 2025 growth target to at least 8 per cent and is targeting double-digit growth from 2026-2030, but most forecasts remain at 6.5-7 per cent. “While 8 per cent or higher growth rate is possible, exports and manufacturing will not be sufficient to drive this outperformance,” the UOB asserted.

Additional capital expenditure, particularly from public investment, will be needed to stretch further as well as to buffer against any potential downturns in trade. Vietnam’s capital investment ratio has stayed around 30 per cent of GDP at least over the past decade. In contrast, China’s gross capital formation has stayed consistently above 40 per cent in the same period. This suggests that Vietnam has been underinvesting relative to its large neighbour and there is certainly a case for higher public investment, particularly with the government aiming for double-digit growth.

“Taking into account the above factors, we remain cautiously positive about Vietnam’s outlook,” UOB reported.

With economic growth staying robust in 2024 and into 2025 and the US Fed poised to hold steady, there is less urgency for the central bank to hurry into any policy easing. At the same time, inflation ticked higher to 3.6 per cent in 2024 from 3.26 per cent in 2023, though still below the 4.5 per cent threshold.

However, with the prospects of further trade tensions globally under Trump 2.0 and the accompanying US dollar strength an emerging concern, the SBV is expected to stay alert to downside pressures on the VND. As such, the best course of action currently is for the key refinancing rate to stay at 4.5 per cent, according to the UOB.

The VND weakened to a record low of about 25,600/USD in early Mar after the SBV raised its USD sale prices to banks to 25,698/USD from 25,450/USD, the first increase since last October. From here, the path of resistance is still biased towards further VND weakness due to China’s growth and tariff uncertainties, UOB said.

There is a risk of the US imposing tariffs on Vietnam, owning to the latter’s sizeable and growing trade surplus with the US. Potential tailwinds to offset VND depreciation pressures include a strong domestic growth outlook and the SBV’s pledge to ensure a stable exchange rate.

Overall, the UOB’s updated USD/VND forecasts are 25,800 in 2Q25, 26,000 in 3Q25, 25,800 in 4Q25, and 25,600 in 1Q26.

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Differences are advantage for New Zealand relations

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In light of the establishment of a comprehensive strategic partnership early this month, New Zealand and Vietnam stand to enjoy more robust economic relations. Warrick Cleine, chair of the New Zealand Chamber of Commerce in Vietnam, talked with VIR’s Thanh Van about the future prospects of bilateral economic ties.

Could you comment on the important milestone of New Zealand and Vietnam upgrading ties to a comprehensive strategic partnership (CSP)?

Differences are advantage for New Zealand relations
Warrick Cleine, chair of the New Zealand Chamber of Commerce in Vietnam

This is a special year for New Zealand and Vietnam, marking 50 years of diplomatic relations, and coming at a time that many of the two countries areas of common interest are under threat.

Prime Ministers Pham Minh Chinh and Chris Luxon shook hands on February 27 on the visit of the latter to Hanoi, confirming the culmination of many years of hard work to realise the CSP.

This is not new for Vietnam. The country has been working hard to build stronger diplomatic and economic relationships with many partners, and the CSP framework has been helpful to differentiate the various relationships. This provides focus for both officials and business leaders in each country, and should over time deliver outsize economic, cultural, political, and social benefits to the two countries.

How does this elevation unlock new opportunities?

On the face of it, New Zealand and Vietnam are very different. Vietnam sits at the heart of Asia, a fast-growing economy of 100 million people, with an ambitious industrial strategy and increasing importance as a manufacturing hub for global exporters.

New Zealand, on the other hand, is a remote western liberal democracy located in the South Pacific, a member of the Commonwealth with just over five million people, and the majority of exports related to primary production in the agricultural, horticultural, and seafood industries.

However, this hides the intense common interest that both countries have as smaller, export trading nations, in preserving and promoting the rules based global trading order, particularly through multilateral organisations such as the World Trade Organization, and through the mutual entry and recognition of free trade agreements.

Vietnam and New Zealand worked hard to maintain momentum for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signalling common interest in high value and mutually respectful trade relationships. As the new US administration further shakes up the global trade arena, such relationships and common missions take on new and urgent importance.

What is the outlook of economic and business activities between New Zealand and Vietnam under this new arrangement?

It is the differences between the two countries that compel a closer relationship. Vietnamese consumers love the sort of clean, green, and healthy produce that New Zealand is so great at making. This drove New Zealand exports to Vietnam over the $1 billion mark last year, and encouraged over 8,000 Vietnamese to visit New Zealand, despite the costs and challenges of doing so.

New Zealand’s world-class English language education system is also appealing to Vietnamese students, with 1,800 of them currently studying in the country.

On the other hand, Kiwis love buying Vietnamese-made products, validating the countries push to become a manufacturing powerhouse, with over $1.7 billion of exports last year, mostly in electronic goods, footwear, clothing, and machinery.

New Zealanders recognise the value of growing economic, cultural, and social relationships with Asia. According to a recent survey by the Asia New Zealand Foundation, two-thirds of Kiwis see Vietnam as important to New Zealand’s future. The announcement by Vietjet that they will commence four weekly direct flights from Ho Chi Minh City to Auckland from September 2025 will only see this increasing, as more Kiwis and Vietnamese have the opportunity interact with each other.

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Hanoi aims to turn polluted To Lich River into green space

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The Hanoi People’s Committee has also given in-principle approval to a wastewater system project in the West Lake area, with an estimated budget of over 99 billion VND (3.88 million USD) funded by Tay Ho district.

Hanoi aims to turn polluted To Lich River into green space
To Lich River (Photo: VNA)

Hanoi – The People’s Committee of Hanoi has given the greenlight to Sun Group Joint Stock Company’s plan to transform the polluted To Lich River into a green space, creating a landscape and ecological highlight to serve the community.

Relevant units were asked to refine technological solutions for cleaning the riverbed and restoring the river’s bottom. Furthre research will also be conducted to explore ways to use the river as a water storage area during flooding, as part of the broader Capital Drainage Planning.

The municipal People’s Committee has also given in-principle approval to a wastewater system project in the West Lake area, with an estimated budget of over 99 billion VND (3.88 million USD) funded by Tay Ho district.

The project, set to run from 2025 to 2027, will develop a wastewater collection system and pumping stations to connect to the existing West Lake wastewater collection network in two phases. This initiative will lay the groundwork for a fully separate wastewater drainage system for the lake’s surrounding area.

Beyond improving the area’s drainage capacity, the project aims to resolve the issue of wastewater pollution flowing into West Lake, contributing to the restoration and enhancement of the local environment.

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PM chairs meeting of 14th National Party Congress’s sub-committee for socio-economic affairs

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He requested that the draft report must adopt innovative, breakthrough thinking, methodologies, approaches, and practices, in alignment with the global and regional situations as well as the country’s development requirements; and that the content must be more up-to-date, proposing new breakthroughs and drivers for development.

PM chairs meeting of 14th National Party Congress’s sub-committee for socio-economic affairs
Politburo member and Prime Minister Pham Minh Chinh (Photo: VNA)

Hanoi – Politburo member and Prime Minister Pham Minh Chinh, head of the sub-committee for socio-economic affairs of the 14th National Party Congress, chaired the sub-committee’s fourth session to continue supplementing and finalising the draft socio-economic report in Hanoi on March 13.

The PM stated that, compared to the draft report before the Party Central Committee’s 10th session, many contents have been adjusted and updated, such as results of socio-economic development, with more specific and accurate data, growth directions, tasks, and goals, with a target of 8% in 2025 and double digits in the following years, development orientations and tasks focusing on science and technology, innovation, digital transformation, and the need to consider the role of the private sector.

He requested that the draft report must adopt innovative, breakthrough thinking, methodologies, approaches, and practices, in alignment with the global and regional situations as well as the country’s development requirements; and that the content must be more up-to-date, proposing new breakthroughs and drivers for development.

Chinh required sub-committee members to discuss and assess the situation accurately, proposing feasible, high-efficiency goals, tasks, and solutions, especially to achieve the two goals set for the country’s 100-year anniversary.

He suggested that they should discuss and reach a consensus on the content, continue to refine the draft socio-economic report to present to the Politburo. After receiving the Politburo’s feedback, the report should be finalised and submitted to the Party Central Committee for presentation at its session in early April.

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