Vietnam’s economy continued to expand in the opening quarter of 2026 but at a slower pace than late last year, according to data released by the National Statistics Office (NSO). Gross Domestic Product grew 7.83% year-on-year in Q1, higher than the 7.05% recorded in the same quarter of the prior year but below the 8.46% growth seen in the fourth quarter of 2025.
The deceleration comes as an escalation in the Middle East has disrupted crude supplies and driven sharp increases in domestic fuel prices. The country sources more than 80% of its crude from the Middle East, and the six-week-long conflict coincided with steep local fuel moves: Petrolimex data show diesel prices jumped 84% while gasoline rose 21% over the period.
Higher fuel costs have filtered into consumer prices. Headline consumer price inflation rose to 4.65% in March, with transport costs surging 10.81% and acting as a major driver of the uptick. In response to the immediate inflationary pressure, authorities introduced emergency measures including cuts to fuel taxes, targeted price subsidies and a nationwide push to increase remote work as a demand-management tool.
The spike in import costs also reversed Vietnam’s typical trade position. Exports increased 19.1% to $122.93 billion in the quarter, but imports climbed faster, rising 27% to $126.57 billion. The result was a quarterly trade deficit of $3.64 billion, a marked departure from the trade surpluses the export-oriented economy usually posts.
Industrial activity showed signs of strain as manufacturers faced higher input expenses. Industrial production grew 6.9% in March compared with 8.6% in March of the previous year, suggesting production momentum softened as cost pressures mounted.
Despite the near-term headwinds, foreign investment flows displayed resilience. Foreign Direct Investment inflows increased 9.1% to $5.41 billion in the first quarter, while new investment pledges - an indicator of prospective activity - rose 42.9% to $15.2 billion.
Policy makers have maintained an ambitious 10% annual growth target. Prime Minister Pham Minh Chinh reiterated that goal and outlined measures to respond to the shock, pledging to accelerate public investment and to diversify oil supply chains away from the Middle East toward partners in the Gulf, Japan and South Korea.
The episode underscores the exposure of frontier manufacturing hubs to energy-driven supply chain disruptions. Market participants are watching closely to see whether the government’s mix of subsidies and supply diversification can ease margin pressure for Vietnam’s large electronics and textile exporters ahead of what is expected to be a high-demand second half of the year.
Summary
- GDP growth slowed to 7.83% year-on-year in Q1 2026, down from 8.46% in Q4 2025.
- Local fuel prices spiked amid a six-week Middle East conflict, with diesel up 84% and gasoline up 21% per Petrolimex data.
- Trade turned into a $3.64 billion quarterly deficit as imports rose faster than exports.
Key points
- Macroeconomic indicators: GDP rose 7.83% YoY; consumer inflation reached 4.65% in March, driven by a 10.81% increase in transport costs.
- Trade and industrial impact: Exports climbed 19.1% to $122.93 billion, imports jumped 27% to $126.57 billion, creating a $3.64 billion deficit; industrial production growth eased to 6.9% in March from 8.6% a year earlier.
- Investment flows: FDI inflows rose 9.1% to $5.41 billion and new investment pledges increased 42.9% to $15.2 billion, indicating sustained investor interest.
Risks and uncertainties
- Energy supply vulnerability - Sectors most exposed: manufacturing, transport, and export-oriented industries could see margin pressure if fuel price volatility persists.
- Inflationary pressures - Sectors most exposed: consumer-facing industries and domestic services may face demand shifts as higher transport and energy costs feed into prices.
- Trade balance deterioration - Sectors most exposed: electronics and textiles that rely on imported inputs may face squeezed margins unless import cost increases are offset.