World Bank Cuts Vietnam Growth Forecast to 6.6% Due to U.S. Tariffs

The World Bank has lowered its economic growth forecast for Vietnam to 6.6% for the current year, citing the impact of U.S. tariffs on the country's exports. This revision comes as evidence of the tariffs' effects on Vietnam's export-oriented economy becomes more apparent. The World Bank had initially projected a GDP growth rate of 6.8% for Vietnam, but the new forecast indicates a deceleration in economic activity due to the tariffs.

The revised projection falls short of Vietnam's official growth target, which ranges from 8.3% to 8.5%. The World Bank highlighted that Vietnam, being an export-driven economy, is susceptible to a slowdown in global economic growth and reduced demand from its primary trading partners. The uncertainty surrounding trade policies is also beginning to erode the confidence of businesses and consumers.

The U.S. is Vietnam's largest export market. Since August 7, the U.S. has imposed a 20% tariff on Vietnamese goods, and products transshipped through Vietnam from third countries face a 40% tariff. This has resulted in a noticeable decline in Vietnam's export growth. The Oxford Economics Research Institute reported that Vietnam's export value in August, after seasonal adjustment, decreased by 3.6% compared to July. The Vietnamese government's data showed that August's export value increased by 14.5% year-on-year and 2.6% month-on-month, but did not provide seasonally adjusted figures.

The Oxford Economics Research Institute also noted that while the overall export growth rate is expected to slow due to tariffs, the electronics sector may show some resilience. The World Bank predicts that Vietnam's economic growth will slow to 6.1% by 2026, but is expected to rebound to 6.5% by 2027. This rebound is anticipated to be driven by a recovery in global trade and Vietnam's continued attractiveness as a competitive manufacturing base.

The Vietnamese government has acknowledged the challenges posed by global trade tensions and geopolitical conflicts, which are affecting production and supply chains. The Prime Minister has warned of increasing inflationary and currency pressures. Despite these challenges, domestic economic activity in Vietnam remains robust. Even if export growth continues to slow, consumption and government-led investments are expected to sustain economic growth.