Macro/ Strategy

High inflation in May but expected to cool down in June

General CPI in May 2026 increased by 5.60% YoY. In 5M2026, CPI increased by 4.31% YoY, core inflation increased by 4.04% YoY. In less than half a year, inflation is close to the Government's target - 4.5% in 2026. However, we expect inflation to cool down in June when oil prices have returned to the 80 USD/barrel price level after the US and Iran signed a framework agreement on a 60-day ceasefire.

Domestic production continues to be a bright spot

The economic growth target for 2026 is strongly supported by domestic production in the first five months of the year. Vietnam's PMI unexpectedly rose to 52.8 points in May 2026 from 50.5 points in April 2026. Thanks to the demand for inventory due to concerns about the US-Iran conflict, the number of orders from foreign markets increased in May. However, businesses remain cautious, resulting in lower new hires and inventory levels compared to the previous month.

The Industrial Production Index (IIP) grew by 8.8% YoY in May 2026. The manufacturing sector continued to lead the industry with a 9.0% YoY growth. Other manufacturing sectors also maintained their growth momentum in May 2026, such as mining (6.0% YoY), electricity production and distribution (8.5% YoY), and water supply; waste management and wastewater treatment (8.7% YoY). Notably, in May, the production of pharmaceuticals, chemicals, and medicinal materials within the manufacturing sector saw the highest growth rate at 23.2% YoY.

Exchange rate stability

The USD/VND exchange rate in the free market in the first five months of 2026 decreased by 1.3% YTD, from 26,750 USD/VND to 26,400 USD/VND. The exchange rate in the free market is no longer as volatile as in the previous two years. In 2025, the VND depreciated by 3.9% against the USD. In 2024, the VND depreciated by 4.2% against the USD. Maintaining exchange rate stability in 2026 contributes to reducing input cost pressure amidst the current trade deficit. In the first five months of 2026, Vietnam had a trade deficit of 13.8 billion USD.