UOB: Q1 GDP Beats Expectations; 2026 Outlook Remains Stable

According to UOB, Vietnam’s GDP grew by 7.83% year-on-year in Q1 2026, exceeding expectations thanks to strong momentum from manufacturing, construction, and services. Growth for 2026 is forecast to remain stable amid positive trends in external trade and FDI, while inflation, energy, and geopolitical factors continue to be closely monitored…

Entering 2026, experts from the Global Economics & Markets Research division at UOB (Singapore) assess that Vietnam’s economy continues to maintain a solid growth foundation, demonstrating strong adaptability and resilience despite ongoing global uncertainties. Although growth may be moderated by seasonal factors and external impacts, key drivers such as manufacturing, exports, and investment remain on an upward trajectory, providing an important foundation for subsequent quarters.

Adjustment To 2026 Growth Forecast

According to the General Statistics Office, GDP growth in Q1 2026 reached 7.83% year-on-year, lower than 8.46% in Q4 2025 but exceeding earlier forecasts (7.0% by UOB and 7.60% by Bloomberg). This trend aligns with typical patterns, as the first quarter is often affected by fewer working days due to the Lunar New Year holidays, not only in Vietnam but across many Asian economies.

Growth continues to be driven by key sectors such as manufacturing, construction, and services. Notably, manufacturing output increased 9.73% year-on-year, nearly matching the 10.6% of the previous quarter and higher than the same period in 2025, reflecting the stability of the production sector—the backbone of the economy.

International trade activities continued to expand strongly. Exports reached USD 122.93 billion, up 19.1%, while imports rose 27.0% to USD 126.57 billion, resulting in a trade deficit of USD 3.64 billion. However, the increase in imports is mainly for production purposes, indicating positive prospects for upcoming quarters.

The United States remains the largest export market, with USD 33.9 billion, up 24.2%, accounting for about 28% of total exports, highlighting Vietnam’s strengthening position in the global supply chain.

Meanwhile, disbursed FDI reached USD 5.41 billion in Q1 2026, up 9.1%, reflecting continued confidence from foreign investors and ongoing supply chain diversification trends.

According to UOB, a notable point is that CPI in March 2026 rose 4.65% year-on-year, exceeding the State Bank’s target of 4.5%, after averaging 2.94% in the first two months. Inflationary pressure mainly stems from rising energy prices, which have spilled over into consumer prices; notably, the transportation group (accounting for 9.7% of the CPI basket) increased by 10.8%, reversing the previous downward trend. To respond, the government has used the fuel price stabilization fund, while some airlines have had to cut capacity due to fuel shortages.

Challenges And Outlook

According to Mr. Suan Teck Kin, Head of Global Economics & Markets Research at UOB, Vietnam will continue to face multiple challenges in 2026–2027 that could hinder the goal of achieving over 10% growth, including persistent risks of U.S. tariffs. Additionally, conflicts in the Middle East are driving up energy and input costs, putting pressure on business operations.

UOB experts note that Brent oil prices remaining around USD 100–110 per barrel increase transportation and logistics costs, while supply faces risks due to declining inventories and the Strait of Hormuz continuing to be a global bottleneck.

Beyond energy, the Middle East also supplies essential inputs such as petrochemicals, plastics, aluminum, fertilizers, sulfur, helium, and steel components. Therefore, supply chain disruption risks will increase if conflicts persist.

Taking these factors into account, UOB has revised down Vietnam’s GDP growth forecast for 2026 to 7.0%, from the previous 7.5% (with 2025 growth at 8.02%).

“The most challenging period is expected to occur in Q2 and Q3 of 2026, when global energy prices remain high and supply constraints peak, before easing toward the end of 2026,” UOB experts forecast.

Accordingly, economic growth is expected to slow in the coming quarters, reaching 6.5% in Q2 2026, 6.8% in Q3, and 7.0% in Q4, lower than previous estimates of 7.5%, 7.8%, and 7.6%, respectively. These forecasts still carry high uncertainty and downside risks, largely depending on developments and the timing of easing tensions in the Middle East.

Prioritizing Infrastructure And Energy To Sustain Growth

On a positive note, Mr. Suan Teck Kin emphasized that the government has clearly identified infrastructure as one of the biggest bottlenecks hindering growth. This is a key factor in improving productivity, efficiency, and boosting aggregate demand.

As a result, public investment is being accelerated across various sectors, including transport, logistics, seaports and airports, electricity, water, digital infrastructure, healthcare, education, and workforce training. Administrative streamlining efforts over the past year—such as merging provinces and ministries and promoting the use of English in public administration—are also seen as positive steps to enhance efficiency and productivity.

Entering 2026, ensuring a stable and reasonably priced energy supply has become a top priority to support factories, businesses, consumers, and logistics operations, while maintaining economic growth and controlling inflation. The government has implemented various measures to reduce supply disruption risks, including a target to build fuel reserves sufficient for 90 days.

Specific solutions include suspending fuel and environmental taxes, utilizing the fuel price stabilization fund, strengthening energy diplomacy to secure supply from partners such as Japan, targeting at least 3% electricity savings in 2026, accelerating the rollout of E10 biofuel from April 2026, and expanding oil storage facilities in Thanh Hoa province.

In addition, the government is considering allowing petroleum companies to set their own retail prices within their distribution systems under regulatory supervision. This measure is expected to help fuel prices better reflect supply-demand dynamics and true market value rather than being distorted by subsidies or price controls.

According to UOB, as inflation is expected to continue rising and exceed the 4.5% target, the State Bank of Vietnam’s policy direction becomes a focal point. However, since inflationary pressure mainly comes from the supply side, monetary tightening is not considered an appropriate solution.

Therefore, the central bank is unlikely to adjust policy in the short term. Instead, policy responses will rely more on government measures to mitigate input cost pressures and supply disruptions. On this basis, the refinancing rate is expected to remain at 4.5% throughout 2026.