“UOB Retains 6% GDP Growth Forecast for 2025, VND to Recover from Q4”

9 June, 2025

The UOB (Singapore) Global Economics and Markets Research department has released its forecast for Vietnam’s economic growth in Q2 2025.

Tariff risks continue to weigh on the economic outlook.

Vietnam’s General Statistics Office reported a 6.93% year-over-year growth in real GDP for Q1 2025, slightly lower than UOB and market expectations (7.1%) and Q4 2024 (7.55%). While the longer-than-usual Lunar New Year holiday played a part, trade and investment activities remained robust. However, the market’s attention quickly shifted to tariff concerns as the “Liberation Day” developments on April 2nd dominated market sentiment.

The announcement on April 2nd regarding the imposition of a 46% retaliatory tariff on Vietnamese exports to the US sent shockwaves globally. This, along with other retaliatory tariffs announced that day, far exceeded previous expectations. Even Singapore, which has a bilateral free trade agreement with the US, was subjected to a base tariff of 10%.

In our April 2nd report, UOB lowered its 2025 and 2026 global growth forecasts to reflect the severe negative impact on international trade and investment flows. Specifically, for Vietnam, we adjusted our growth forecast downward to 6% (from 7% pre-April 2nd), compared to the 7.09% achieved in 2024. Previously, the National Assembly had set a growth target of “at least 8%” for 2025, aiming for “double-digit” growth in the 2026-2030 period.

The next critical milestone is July 9th, when the 90-day tariff suspension is expected to end. According to reports, Vietnam is currently engaged in trade negotiations with the US, with the second round of talks taking place from May 19-22. The next round is tentatively scheduled for “late June.”

Economic activities rebounded during the 90-day tariff suspension period, with April’s export and import figures surging higher than expected on a year-over-year basis, at 20% and 23%, respectively. This surge was primarily driven by businesses rushing to complete transactions before the end of the tariff suspension period.

Exports to the largest market, the US, soared by 34% year-over-year, the fastest pace since January 2024. However, given the uncertainty surrounding tariff policies, UOB maintains a cautious outlook for Vietnam due to its trade-dependent economy (with exports accounting for about 90% of GDP) and significant exposure to the US market (about 30% of total exports). Additionally, exports are heavily concentrated in key sectors such as electronics, furniture, textiles, and footwear (comprising around 80% of total exports to the US). UOB maintains its economic growth forecast for Vietnam at 6% in 2025 and 6.3% in 2026. Specifically, for Q2 and Q3 2025, GDP growth is expected to reach 6.1% and 5.8%, respectively.

SBV maintains policy rates.

Inflation in Vietnam has shown some signs of cooling, hovering around 3.1% year-over-year in both March and April, down from the 2024 average of 3.6% and 3.26% in 2023, and still below the 4.5% target. This backdrop of moderate inflation, coupled with escalating global trade tensions and tariff uncertainties, presents an opportunity for the State Bank of Vietnam (SBV) to ease monetary policy. However, unlike some of its regional neighbors, the current weakness in the Vietnamese dong (VND) is a factor the SBV has to consider. Given these circumstances, UOB expects the SBV to maintain policy rates, with the refinancing rate kept at 4.5%.

Should domestic business conditions and the labor market deteriorate significantly, there is an expectation that the SBV could lower the refinancing rate once to the COVID-19 low of 4% and potentially by another 50 basis points to 3.5%, provided the foreign exchange market remains stable and the US Federal Reserve delivers rate cuts. For now, the base case scenario remains that the SBV will hold policy rates steady.

From Q4 2025 onwards, the VND regains momentum.

So far this quarter, the VND has depreciated by 1.8%, hitting a new record low of around 26,000 VND/USD. This weakness stems from a less favorable economic outlook—UOB lowered its 2025 GDP growth forecast to 6%, down from 7.09% in 2024—coupled with heightened risks of the US reimposing the 46% tariff announced on “Liberation Day” if US-Vietnam trade negotiations do not yield significant progress. These factors are expected to continue putting pressure on the VND in the near term.

UOB anticipates that the VND will remain in a weak trading range against the USD through Q3 2025. However, from Q4 2025 onwards, the VND may start to regain momentum, joining other Asian currencies in a broader recovery as trade tensions ease. Updated USD/VND forecast: 26,300 in Q3 2025, 26,100 in Q4 2025, 25,900 in Q1 2026, and 25,700 in Q2 2026.