UOB upbeat on Viet Nam’s economic prospect in 2026

In its latest update on global and regional economic prospects, the Singapore-based bank noted that the world economy is likely to remain volatile in 2026 as geopolitical conflicts and policy changes continue to shape global markets.

Proposals related to new U.S. tariffs are increasing risks to global trade, while geopolitical tensions in the Middle East, particularly conflicts involving the U.S., Israel, and Iran, are making energy and commodity markets more sensitive to political developments.

The Executive Director in Global Economics and Markets Research at UOB, Suan Teck Kin, said evolving US tariff policies and escalating tensions in the Middle East are key factors affecting economic stability in Asia.

An escalation of conflict in the Middle East and risks to the Strait of Hormuz have become key macroeconomic threats to Asia, mainly through higher oil prices, rising inflationary pressures, weaker domestic currencies, and deteriorating market sentiment, he said.

Despite these challenges, UOB maintained its growth and inflation forecasts for most Asian economies, including Viet Nam. It acknowledged downside risks to growth and upside risks to inflation.

The bank noted that Viet Nam entered 2026 on a solid footing after posting economic growth of 8.02 percent in 2025, reflecting a strong rebound in manufacturing, exports, and domestic consumption.

On that basis, UOB maintained its forecast for Viet Nam's gross domestic product (GDP) growth at 7.5 percent in 2026, with first-quarter growth projected at around 7 percent.

Key growth drivers are expected to include the Government's commitment to accelerating infrastructure investment, continued expansion of export-oriented manufacturing, and sustained inflows of foreign direct investment (FDI).

However, external uncertainty could still affect the outlook. A proposed global tariff of 10 percent by the US could impact trade flows and supply chains, while fluctuations in energy prices driven by geopolitical tensions may raise production and logistics costs.

Commenting on the potential impact of Middle East tensions on domestic fuel prices, Dinh Duc Quang, Managing Director of the Currency Business Division at UOB Viet Nam, said the conflict remains a major factor influencing global oil prices, which in turn affects domestic fuel costs, an important input for manufacturing, transport, and other sectors.

Nevertheless, he noted that Viet Nam has been working to diversify its energy supply sources in recent years and, at the same time, enhance energy self-sufficiency through exploiting crude oil, expanding domestic refining capacity, and accelerating the transition to renewable energy such as solar and wind power. These measures could help mitigate the impact of global fuel price volatility.

Regarding the monetary policy, UOB expects the State Bank of Viet Nam to keep the refinancing rate unchanged at 4.5 percent as economic growth remains resilient and inflation is under control.

Viet Nam's inflation eased to 2.53 percent year on year in January 2026, down from 3.48 percent in December 2025 and lower than the market forecast of 3.1 percent, with price increases mainly driven by food, housing, and education.

Meanwhile, oil prices may rise in the short term due to tensions in the Middle East. Under UOB's baseline scenario, Brent crude could climb to around US$90 per barrel in the second quarter of 2026 before easing to about US$80 by the end of the year.

While global risk aversion may continue to pressure the Vietnamese dong in the near term, UOB expects its medium-term outlook to remain stable, supported by strong economic fundamentals, robust FDI inflows, and the possibility of Viet Nam being upgraded to emerging market status later this year.

The bank forecasts the USD/VND exchange rate to fluctuate within a range of about 2–3 percent in 2026, reaching around VND26,400 per USD in the second quarter, VND26,200 in the third quarter, and easing to approximately VND26,100 by the end of the year./.