Vietnam economy: Stronger growth, higher forecast

Vietnam economy: Stronger growth, higher forecast

Vietnam's economy delivered another stronger-than-expected quarter, with GDP growth accelerating to 8.39% y/y in 2Q26 and lifting 1H26 growth to 8.18%, prompting us to raise our 2026 GDP growth forecast to 8.5% from 7.6%. External trade remained the key growth driver, with exports and imports already exceeding our full-year forecasts, while resilient domestic demand, record FDI inflows and moderating inflation provide greater policy flexibility for both fiscal and monetary support despite still-tight banking system liquidity. The key downside risk: The potential expiry of the current S.122 tariff arrangement and ongoing US trade investigations could lead to higher US tariffs on Vietnam despite the economy entering 2H26 from a position of considerable strength.