HÀ NỘI — Việt Nam’s economy is forecast to grow at 6.6 per cent and 6.5 per cent in 2025 and 2026, respectively, following a robust 7.1 per cent growth last year, according to the Asian Development Bank (ADB)’s flagship annual economic publication, released on Wednesday.

While maintaining a positive outlook for Việt Nam this year and next, the Asian Development Outlook April 2025 highlighted risks to the forecasts, which were finalised before the announcement of US tariff measures.

“Strong trade, a recovery in export manufacturing and robust foreign direct investment fuelled Việt Nam’s economic growth in 2024”, said ADB Country Director for Việt Nam Shantanu Chakraborty.

“However, recent US announcements on tariffs, along with other continued global uncertainties, could pose significant challenges to the country’s growth this year.”

The evolving global economic environment, significantly affected by recent tariff-related announcements by the US and geopolitical tensions, is posing significant challenges for economies dependent on export-driven manufacturing. External uncertainties, such as tariff escalations, reciprocal measures, the prolonged war in Ukraine and ongoing instability in the Middle East could constrain near to medium-term global economic growth, it warned. Moreover, a slowdown in the US and the People Republic of China, Việt Nam’s major trading partners, could further affect economic prospects.

“The Government of Việt Nam has initiated an ambitious plan to boost growth, which can help mitigate the significant external risks,” Chakraborty added.

“Higher and sustainable economic growth is possible if ongoing, extensive institutional reforms are implemented swiftly and efficiently. Such reforms would stimulate domestic demand, increase governance efficiency in the near term and consequently promote private sector development over the medium and long term.”

Enhancing Việt Nam's participation in global supply chains is a critical policy challenge for the country's development. As global economic dynamics evolve, Việt Nam's advantages in value addition to global supply chains are also shifting. It is important to understand the limitations and challenges associated with broadening its participation in and increasing its added values to global supply chains, to improve the country's economic trajectory and long-term growth potential. Global supply chains with FDI firms already in the country present an opportunity to diversify external demand when export markets are tightened.

“The tariffs announced by the US on April 2, 2025, have the potential to significantly impact Việt Nam’s growth in 2025 and 2026. Maintaining economic stability, ensuring the well-being of the vulnerable and maintaining jobs remains a top priority, making additional fiscal stimulus essential to boost domestic demand. Extending the VAT reduction until late 2026 is a positive step, but broader measures, such as potential income tax and fee cuts, as well as social spending expansion, could also be considered. In addition, further structural reforms to relieve regulatory burdens for businesses and households will enhance longer-term growth,” he added.

The Chief Economist at ADB in Việt Nam, Nguyễn Bá Hùng, pointed out that compared to other ASEAN countries, Việt Nam is among the nations with a significant trade surplus with the US. As a result, the risk of facing tariffs is higher. While countries like Singapore and the Philippines have lower trade surpluses and thus face less risk, Việt Nam - along with Thailand, Malaysia, and others - has a notably high surplus. This explains why Southeast Asian countries are facing heavier tariffs. While these countries are seeking appropriate responses, it remains too early to fully assess the actual impact.

Hùng explained that US tariff policies are creating uncertainty, causing foreign investors to adopt a 'wait-and-see' approach. Since the final tariff thresholds and timelines are unclear, many investors are holding off on making new decisions.

The Vietnamese Government’s quick and well-prepared response has been viewed positively, but since the US has yet to show any willingness to negotiate, it is important to keep monitoring the situation, Hùng added.

He recommended that stimulating domestic demand is the right approach to overcoming current challenges. Increasing Government spending on infrastructure, technology and innovation will not only enhance business competitiveness but also attract more FDI.

ADB Director, Chakraborty said that Việt Nam still holds a strong economic position within the region. The US tariff actions, while creating pressure, could actually push Việt Nam to better leverage the Free Trade Agreements (FTAs) it has in place, many of which have not been fully utilised.

With tariffs on the rise, expanding export markets to countries like the UK, the EU and other Asian economies such as South Korea will help Việt Nam diversify its markets. This will reduce the country's dependency on the US and take advantage of its growing role as a key economic hub in Asia. This is seen as a positive strategy to mitigate the impact of US tariffs. — VNS