In its latest report, the Singapore-based bank said that energy shocks originating from the Middle East are exerting short-term pressure on Vietnam as well as other Asian economies.

With Brent crude prices fluctuating between US$100–110 per barrel, rising energy costs are directly affecting transportation and logistics sectors.

Beyond pricing pressures, disruptions at the Strait of Hormuz are also impacting the supply of key inputs across industries, including agriculture, construction, plastics, semiconductors, and health care. As a result, risks of widespread supply chain disruptions are increasing.

UOB also flagged US trade policy as a factor to watch, noting that Vietnam, along with other economies, could face trade investigations under Section 301 and related measures.

Suan Teck Kin, Head of Research at UOB, said the Middle East conflict is affecting both energy prices and supply security. This raises input and operating costs for businesses, increasing production risks and placing pressure on overall business activities.

Despite these headwinds, Vietnam’s Q1 GDP growth of 7.83% exceeded expectations, surpassing both UOB’s forecast (7.0%) and Bloomberg’s estimate (7.6%). Growth in the first quarter was supported by manufacturing, construction, and services.

External and investment momentum remained solid. Exports increased 19.1% year on year and imports rose 27.0%, resulting in a trade deficit of US$3.64 billion in the first quarter, compared with US$3.09 billion previously. The United States was Vietnam’s largest market, with shipments up 24.2%. Realised FDI grew 9.1% to US$5.41 billion, reflecting ongoing supply-chain diversification.

However, due to geopolitical risks, UOB has lowered its quarterly growth projections for the rest of the year to 6.5% in Q2, 6.8% in Q3 and 7% in Q4 from their previous projections of 7.5%, 7.8%, and 7.6%, respectively. The Vietnamese government has set a full-year growth target of 10%. According to the bank, achieving this would require growth of at least 10% in each remaining quarter.

On the positive side, the government has identified infrastructure as a key bottleneck to growth. The UOB expert noted that infrastructure is critical to improving productivity and efficiency while also boosting aggregate demand. Public investment is therefore being accelerated across multiple sectors.

Regarding monetary policy, UOB expects the State Bank of Vietnam to keep the refinancing rate unchanged at 4.5%.

Inflation is projected to rise in the coming months, but mainly due to supply-side factors. As such, tightening monetary policy is not seen as an appropriate response.

Instead, the burden of managing these pressures is likely to fall on the government through measures aimed at mitigating the impact of rising prices and supply shortages across the economy.

Overall, these forecasts are subject to substantial uncertainty and downside risks, depending on how and when the Middle East situation is resolved.

UOB raises Vietnam’s 2025 GDP growth forecast to 7.7%

VOV.VN - Singapore’s United Overseas Bank (UOB) has recently upgraded its 2025 GDP growth forecast for Vietnam to 7.7%, citing the country’s robust export performance, resilient manufacturing activity and sustained foreign investment inflows.