HÀ NỘI — Singapore-based lender United Overseas Bank (UOB) has raised its forecast for Việt Nam's economic growth in 2026 to 8.5 per cent from 7 per cent, citing stronger-than-expected expansion in the first half of the year despite geopolitical tensions and external trade risks.

Việt Nam's economy expanded 8.18 per cent in the first six months of 2026 from a year earlier, after growth accelerated to 8.39 per cent in the second quarter from 7.94 per cent in the first quarter, according to data released by the National Statistics Office of Vietnam.

The bank said Việt Nam entered the second half of the year with strong economic momentum despite headwinds including conflict in the Middle East, elevated energy prices, supply chain disruptions and uncertainty over global trade policies.

Manufacturing remained the main driver of growth, supported by robust global demand related to artificial intelligence. Industrial production rose 12.7 per cent year-on-year in June and 10.8 per cent in the first half of 2026, compared with an 8.7 per cent increase in the same period a year earlier. Manufacturing output climbed 11.4 per cent during the six-month period, contributing the largest share of industrial growth.

Despite the strong economic performance, Việt Nam's external balance weakened, with the trade account posting a deficit of about $15 billion in the first half of 2026, compared with a surplus of $7.9 billion a year earlier.

UOB attributed the widening deficit largely to higher fuel import costs following the conflict in the Middle East. Imports of petroleum products reached $4.8 billion in the first five months of the year, equivalent to about 70 per cent of the value recorded for the whole of 2025.

The bank said it expects the trade balance to return to surplus toward the end of 2026 as energy prices ease, supported by negotiations between the US and Iran and the reopening of the Strait of Hormuz to maritime traffic.

On monetary policy, UOB said it expects the State Bank of Vietnam to leave interest rates unchanged for the rest of 2026.

"While there is greater room for flexibility, SBV is likely to avoid both aggressive tightening and premature easing," the bank said.

It said raising rates would do little to curb supply-driven inflation stemming from higher energy and imported input costs, while cutting rates would be difficult to justify with inflation remaining close to the central bank's target ceiling.

UOB also warned that Việt Nam's export-dependent economy remains vulnerable to swings in global trade, including changes in US trade policy, fluctuations in energy prices and shifts in demand linked to artificial intelligence, which could weigh on growth in the coming months. — VNS