The World Bank East Asia and Pacific Economic Update released on April 25 shows after securing 7.1% growth in 2024, Vietnam’s GDP growth is projected to slow to 5.8% in 2025 given increased uncertainties due to recent trade policy shifts and a projected slowdown of global growth.

World Bank experts say, Vietnam, a trade-oriented economy, is particularly exposed to ongoing shifts in global trade policies and associated uncertainty which would impact exports, investment, and growth. The United States remains the largest export destination of Vietnam, accounting for 30% of total exports, compared to 15% to China, 13% to the European Union and 8% to other ASEAN countries, while China accounts for 38% of its imports.

The World Bank highlights several external risks that could negatively affect Vietnam’s economy in the near future. These include unfavorable shifts in trade policies, slower-than-expected global growth, and heightened uncertainty in global policies, all of which could impact the country’s export growth and reduce private investment inflows, including foreign direct investment.

Furthermore, uncertainty could further dampen consumer confidence and spending, which have already been lagging behind GDP growth in recent years. At the same time, vulnerabilities in the financial sector persist, with the average loan-loss coverage ratio among 26 banks dropping to 83%, down from 150% in 2022. While the government has the fiscal capacity to stimulate demand, the effective execution of fiscal measures may be hindered by chronic under-disbursement in public investment.

World Bank experts predict that Vietnam’s GDP growth will decrease to 5.8% in 2025, driven by growing trade policy uncertainty. However, the medium-term growth outlook for the country remains optimistic, with GDP expected to recover to 6.1% in 2026 and 6.4% in 2027.

Although real estate transactions have stayed subdued, they are expected to recover by 2025-26. Inflation is projected to stay within the target range of 4.5-5%, as oil and commodity prices are anticipated to continue to ease. This growth outlook bodes well for poverty reduction efforts in the country.

Yet, external economic uncertainties present risks, potentially leading to job losses among unskilled workers and putting recent poverty reduction achievements at risk. The outlook is increasingly vulnerable to downside risks, particularly from external factors such as unfavourable shifts in trade policy, slower-than-expected global growth, and global policy uncertainty.

Given Vietnam’s reliance on external factors, unexpected disruptions in trade policy could negatively impact exports and overall growth. In addition, weaker-than-expected global growth could reduce external demand, affecting both exports and private investments, including foreign direct investment. Higher-than-anticipated policy uncertainty could further hinder investment and economic growth.

World Bank experts suggest that policy measures should prioritise expanding public investment, addressing fiscal sector risks, and implementing structural reforms. Although there is limited room for monetary policy intervention, fiscal policy can still play a key role in supporting growth, particularly through investments aimed at addressing emerging infrastructure gaps.

Building on recent reforms, such as the revision of the Law on Credit Institutions, further actions to mitigate risks and vulnerabilities in the financial sector are essential to ensure its resilience and stability.

Furthermore, accelerating structural reforms to enhance the regulatory framework in key sectors like information and communication technology, electricity, and transport, as well as promoting a green economy, developing human capital, and improving the business environment, will be critical to sustaining long-term growth, say World Bank experts.

Vietnam’s GDP likely to decrease by 2-3pp if 46% tariff is in effect: expert

VOV.VN - An economic expert has projected that Vietnam’s GDP growth could be affected, with an estimated decrease of 2-3 percentage points if the United States imposes a 46% reciprocal tariff on Vietnamese imports, starting on April 9.