Following 7.5% GDP growth in the first half of 2025 and anticipating support from increased public investment, UOB bank has raised its full-year GDP growth forecast to 7.5%, up from its previous projection of 6.9%. The government's current target is approximately 8.3-8.5%.

In Quarter II, Vietnam's real GDP grew by a robust 7.96% year-on-year, exceeding earlier forecasts. Overall, growth in the first six months reached 7.52% year-on-year, the highest first-half growth rate since 2011.

This strong first-half performance was primarily driven by a 14% year-on-year increase in exports, as market sentiment recovered after US President Donald Trump reduced "reciprocal" tariffs to a temporary base rate of 10% for trading partners for 90 days.

Tariff uncertainty eased in the second half of 2025 after the US finalized country-specific tariffs before the August 1 deadline. The rate for Vietnam was set at 20%.

Despite the risks and uncertainties from tariffs, UOB experts believe the Vietnamese economy has demonstrated resilience and dynamism. Export activity has been particularly strong, although risks remain if US demand weakens due to tariff-driven price pressures.

Suan Teck Kin, Head of Global Economics and Markets Research at UOB (Singapore), stated, "An average annual growth rate of around 7% is entirely feasible for Vietnam from 2026 to 2045. This will become a reality if current reform and opening-up policies, coupled with investment and trade, continue to be promoted and effectively implemented."

Regarding Vietnam's goal of becoming a high-income developed country by 2045, Suan Teck Kin noted that much work remains, drawing on lessons from countries like Singapore, Malaysia, and China. The government has taken positive steps to improve efficiency and productivity by streamlining administrative procedures, such as reducing the number of provinces and empowering the private sector.

He added that Resolution 68 was timely in recognizing and supporting the development of domestic enterprises, with the hope of fostering "flagship businesses."

Transactions at a commercial bank. Photo: Giang Huy

Credit growth for the year could reach 19-20%.

Inflation in Vietnam has yet to show clear signs of decline. As of July, year-to-date inflation reached 3.3%, compared to an average of 3.6% in 2024 and 3.26% in 2023.

Given the positive growth outlook for the latter half of 2025 and pressure on the Vietnamese dong's exchange rate, UOB experts believe these factors will limit the State Bank of Vietnam's ability to ease monetary policy. Consequently, UOB forecasts that the central bank will maintain the refinancing rate at 4.5%.

Since Quarter IV of 2024, a prominent trend among central banks has been to cut interest rates to support economic growth and job creation amid ongoing economic challenges and inflationary pressures.

Dinh Duc Quang, Head of Global Markets and Investment Management at UOB Vietnam, assessed the overall situation as positive and stable, with high economic growth, controlled inflation within the target range, stable interest rates, and an exchange rate fluctuation of around 4% since the beginning of the year.

According to UOB, with an average annual inflation rate of around 4% for an economic growth target of over 8% (or 9%, 10% in the coming years), the current dong deposit interest rate of around 5%, short-term lending rates of 6-7%, and medium-to-long-term lending rates of 8-9% are appropriate for all market participants.

"We also forecast that with the current interest rate levels, system-wide credit could reach 19-20% for the entire year 2025," Dinh Duc Quang stated.

Dinh Duc Quang also noted that regulators will likely maintain the policy interest rate in the short term and only begin lowering it when a clear path for significant USD interest rate cuts in the US market emerges.

In a positive development, UOB's research team predicts that the US may cut USD interest rates three times, totaling 0.5%-0.75%, bringing the USD interest rate to around 3.75% by the end of 2025. If this scenario unfolds, UOB experts anticipate that the State Bank of Vietnam may consider cutting dong interest rates by about 0.25%-0.5% at the end of 2025, creating growth momentum for 2026.

Quynh Trang