Macro Update - Vietnam's key economic indicators indicate solid growth in 2M 2025

- IIP rebounded after declining in January: In February, the overall index of industrial production (IIP) rebounded 17.2% YoY (2M 2025: +7.2% YoY) after slightly declining in January, in which the manufacturing sub-sector IIP surged 20.0% YoY (2M 2025: +9.3% YoY). The latest February PMI report indicates that new orders continued declining, posing potential risks to industrial production growth in coming months. However, purchasing activities increased, aligning with February's trade deficit, which may signal rising demand for inputs to support future production.

- Retail sales remained strong, partly driven by robust international arrivals. In February, total retail sales of goods and services continued to expand, rising 9.4% YoY (February 2024: +8.3% YoY), bringing retail sales growth in 2M 2025 to increase 9.4% YoY in nominal terms (2M 2024: +8.4% YoY) and 6.2% YoY in real terms (2M 2024: +5.3% YoY). Notably, international arrivals reached 1.9 million in February; +23.7% YoY, bringing 2M 2025 arrivals to nearly 4 million; +30.2% YoY. International arrivals may moderate after the Tet holiday, but we still anticipate YoY growth, which should continue to support retail sales. Additionally, major retail companies such as MWG, FPT Retail, and Digiworld all have ambitious business plans for 2025 with higher revenue and profit, which should reflect confidence in a solid demand outlook.

- Budget revenue reached one quarter of the annual plan. State revenue and State expenditures amounted to VND499.8tn (USD19.6bn; +25.7% YoY) and VND293.8tn (USD11.5bn; +13.2% YoY), completing 25.4% (positive signals that State revenue could continue to exceed the target in 2025) and 11.5% of the annual plans, respectively, resulting in a fiscal surplus of VND206.0tn (USD8.1bn) in 2M 2025. State spending for investment & development showed signs of improvement as it increased 13.7% YoY to VND60.4tn (USD2.4bn), completing 7.6% of the annual plan (2M 2024: 8.9%). Despite some signals of improvement in disbursement of public investment, we expect the Government to put further effort into boosting public investment disbursement in the coming months to achieve 95% of the target, as well as to support the new GDP growth target of 8%.