Viet Nam Macro Monitoring

Overview & Synopsis

February data showed robust industrial and trade activity continuing to drive overall growth, while domestic household spending remained more muted despite seasonal Tet support. The continued strong expansion in manufacturing was also reflected in strong intermediate goods trade and strengthening business sentiment. Retail activity, on the other hand, was supported more by tourism-related spending than by household demand for goods. Externally, a U.S. Supreme Court ruling eased tariff pressures on Vietnamese exports, although uncertainty over future trade measures persists. In the banking sector, post-Tet liquidity conditions eased, enabling the SBV to reduce its earlier support as exchange rate pressures eased and interbank rates fell back. However, the Middle East conflict has since triggered an oil-price shock that is beginning to pass through to the domestic economy via higher fuel, transport costs, adding to risks to inflation, external balances, and financial conditions in case of prolonged conflict.