UOB: Vietnam’s Economy Maintains Growth Momentum, While Inflation And Energy Price Risks Remain

UOB maintains its forecast for Vietnam’s GDP growth in 2026 at 7%, with the growth outlook continuing to demonstrate resilience amid increasing pressures and external volatility. However, inflation, exchange rates, and global energy price fluctuations remain key factors that could create pressure in the coming period…

According to the Economic Outlook for Q3 2026 report released by the Market Research and Global Economics Division of UOB (Singapore), Vietnam’s economy is expected to maintain positive growth momentum in 2026 despite facing various external uncertainties, including geopolitical tensions, elevated oil prices, and rising inflationary pressures.

Maintaining Growth Momentum Amid Pressures

UOB analysts stated that Vietnam’s GDP growth reached 7.83% in Q1/2026, lower than the previous quarter’s 8.46%, but still above UOB’s forecast of 7% and Bloomberg’s forecast of 7.6%. Growth was mainly driven by manufacturing, construction, and services, supported by exports increasing 19.1% and realized FDI reaching USD 5.41 billion, up 9.1% year-on-year.

During the 2026–2030 period, Vietnam aims to achieve an average annual GDP growth rate of at least 10%, with the goal of becoming an upper-middle-income country, developing a modern industrial economy, and ranking among the world’s top 30 largest economies by 2030.

Taking a more cautious view, the World Bank (WB) forecasts Vietnam’s economy to grow by 6.8% in 2026, with inflation at 4.2%, while highlighting risks from Middle East conflicts affecting trade, fuel prices, and business activities.

According to UOB’s assessment, upside risks from energy prices and potential changes in US tax policies remain significant, although external demand remains relatively strong, partly supported by the global investment wave in artificial intelligence (AI).

“Based on this outlook, we maintain our GDP growth forecast of 7.0% for 2026. The most challenging period is likely to occur in Q2–Q3/2026, with average growth expected at around 6.7%,” UOB forecasted.

UOB experts also noted that Vietnam’s short-term outlook remains a mix of opportunities and challenges as rising energy costs begin to create pressure. Specifically, manufacturing activity improved in May, with PMI reaching 52.8 points, but inflation rose to 5.6%, the highest level in six years.

Industrial production growth slowed to 9% in May, bringing average Q2 growth down to 9.5%, compared with 11% in Q1. Export growth slowed while imports increased sharply, causing Vietnam’s trade balance deficit to reach USD 12.7 billion in the first five months of the year, the highest level in nearly 30 years.

Pressure on the balance of payments is expected to persist as demand for imported machinery for infrastructure projects rises and oil prices remain elevated. If crude oil averages USD 100 per barrel over the next 6–12 months, Vietnam’s energy import costs could increase by approximately 40% in 2026.

Maintaining Exchange Rate Stability And Controlling Inflation

Inflation remains a major concern for the State Bank of Vietnam (SBV), as average inflation in the first five months of the year reached 4.3%, approaching the target of 4.5%, and could rise to 5.5% for the full year.

In this context, the SBV is likely to maintain current policy interest rates while encouraging reductions in lending rates to support economic growth. However, recovering credit demand is putting pressure on system liquidity, with credit growth reaching 18.26% year-on-year, while liquidity growth was only 7.7%.

Regarding the VND/USD exchange rate, analysts believe the exchange rate has become more stable recently thanks to SBV’s management measures and the temporary easing of tensions in the Middle East. In addition, improved US–China trade relations have supported exports, reduced tariff risks, and strengthened prospects for attracting FDI.

Nevertheless, the Vietnamese dong may still face pressure in Q3/2026 due to prolonged geopolitical uncertainty. In the medium term, the exchange rate outlook is considered relatively stable thanks to positive economic growth, continued FDI inflows, and stable monetary policies. The possibility of Vietnam being upgraded to emerging market status in 2026 is also expected to provide additional momentum for attracting international capital flows.

UOB maintains its view that the VND will gradually depreciate in a controlled manner, forecasting the USD/VND exchange rate at:

• 26,500 in Q3/2026
• 26,400 in Q4/2026
• 26,300 in Q1/2027
• 26,100 in Q2/2027

Crude Oil Awaits Cooling Signals

On international markets, gold and crude oil are experiencing strong volatility due to geopolitical tensions and inflation expectations. For gold, the accumulation phase around USD 4,500/ounce is considered necessary to establish a foundation for a long-term upward trend.

After the Middle East conflict pushed Brent crude prices above USD 100/barrel at the end of March, the short-term outlook for gold has been pressured by concerns over rising inflation and increasing US bond yields. Trading activity has also shown signs of cooling, with gold inventories on COMEX declining and inflows into gold ETFs weakening.

Additionally, several short-term factors are weighing on gold prices, including gold selling activities by central banks such as Russia and Türkiye, as well as India’s efforts to reduce gold purchases to limit pressure on the weakening INR.

Therefore, the current accumulation phase around USD 4,500/ounce is considered highly important, helping gold prices establish a stable foundation before long-term supporting factors, particularly its role as a safe-haven asset, return in the coming months.

According to UOB’s forecast, gold prices may reach:

• USD 4,600/ounce in Q3/2026
• USD 4,800/ounce in Q4/2026
• USD 5,000/ounce in Q1/2027
• USD 5,200/ounce in Q2/2027

Regarding the energy market, Brent crude prices remain heavily influenced by tensions in the Middle East. Disruptions to shipping through the Strait of Hormuz have significantly affected global supply, forcing many Asian economies to seek alternative oil sources and increase the use of strategic reserves.

According to the International Energy Agency (IEA), global oil inventories are declining rapidly, and this trend could continue if geopolitical tensions persist. Without a breakthrough in US–Iran negotiations, Brent crude prices are expected to remain around USD 100/barrel in the second half of 2026 before declining to approximately USD 90/barrel in the first half of 2027.

However, oil price movements remain highly dependent on geopolitical developments. If the Strait of Hormuz reopens, oil prices could fall below USD 90/barrel. Conversely, if conflicts escalate, oil prices could exceed USD 100/barrel and potentially approach USD 120/barrel.

“In this context, maintaining proactive and flexible macroeconomic management will continue to be an important requirement for Vietnam,” UOB experts recommended.