Vietnam’s economy grew 9.95% YoY in 3Q-2026 amid mounting funding pressures

Vietnam's economy expanded by 9.95% YoY in 3Q-2026, exceeding market expectations of around 8.65%YoY and accelerating from 8.81% YoY in the previous quarter. As a result, GDP growth for 9M2026 reached 9.01%, making it one of the highest growth rates in the region. This performance has brought the government's 10-percent growth target closer to reality. However, sustaining such high growth will require Vietnam to rely heavily on accelerated public investment and aggressive credit expansion, both of which are beginning to put pressure on domestic funding sources. This could elevate risks to financial stability if credit growth continues to outpace deposit growth.

• Investment, exports, and household consumption were the main growth drivers

Investment accelerated, supported by both public investment and foreign direct investment (FDI) inflows. Public investment surged by 23.5% YoY, reflecting the government's push to accelerate infrastructure development and budget disbursement. Meanwhile, realized FDI increased by 13.6% YoY, bringing total realized FDI in 9M2026 to USD21 billion – a five-year high. This indicates that Vietnam continues to benefit from the relocation of manufacturing bases in ASEAN.
            Household consumption remained resilient, supported by income growth in the manufacturing and export sectors. Retail sales rose by 14.5% YoY in 3Q26, accelerating from 12.9% YoY in the previous quarter. However, inflation remained relatively elevated at 5.08% YoY in September, driven by higher energy prices feeding through to production and transportation costs.
Although exports surged by 30.0% YoY, imports accelerated at an even faster pace due to rising demand for energy, raw materials, and capital goods. This pushed net exports into negative territory, weighing on economic growth in 3Q-2026. Vietnam recorded a trade deficit of approximately USD19 billion in 9M2026 – its first in a decade – highlighting that robust domestic demand and investment have driven a sharp acceleration in imports.

• The 10% growth target is increasing pressure on domestic funding sources

To achieve the government's full-year growth target of 10%, Vietnam must have economic growth of around 13% in the final quarter, a level that remains highly challenging. As a result, the government is likely to accelerate public investment and support credit expansion to sustain economic momentum. However, growth that relies heavily on credit is beginning to test the banking system's funding capacity, as credit growth has continued to outpace deposit growth since late 2025. During 7M2026, credit expanded by 9.0% YTD, while deposits grew by only 5.7% YTD. This pushed the banking system's loan-to-deposit ratio (LDR) up to 116% in July.
            The widening credit-to-deposit gap has intensified competition among banks to mobilize deposits, driving up funding costs and market interest rates. As a result, some banks have begun raising funds from overseas. While foreign funding can help diversify funding sources, it also introduces additional risks related to interest costs, refinancing, and exchange rate fluctuations.
Overall liquidity in the banking system remains manageable. The State Bank of Vietnam can inject short-term liquidity through open market operations (OMO). However, while OMO helps mitigate short-term volatility, it cannot permanently offset the slower growth of deposit relative to credit. Therefore, the core challenge lies in funding constraints rather than an immediate liquidity shortage.

• Elevated private sector debt increases vulnerability to economic conditions and asset quality

            Credit expansion has helped support economic activity in the short term, but it has also led to a continued rise in private sector debt. Vietnam's private sector credit stood at approximately 145% of GDP in 2025. Such a high debt level increases the vulnerability of businesses and households to an economic slowdown or higher financing costs, which could ultimately translate into pressure on banks' asset quality.
The banking system remains adequately capitalized overall, although capital levels vary significantly across individual banks. The Capital Adequacy Ratio (CAR) stood at 12.06% as of December 2025. Meanwhile, the CARs of the 10 largest listed banks ranged from 9.2% to 16.7%, reflecting disparities in their capital buffers and loss-absorption capacity.
While the non-performing loan (NPL) ratio fell to 3.47% in 1Q-2026, it remained significantly above pre-COVID levels. Most NPLs are concentrated in SMEs, the construction sector, and the real estate sector.

• While economic growth remains robust, future risks are tied to US trade policy uncertainty and rising funding costs

Vietnam's economy faces risks from US trade policy uncertainty. The outcomes of Section 301 investigations into structural excess capacity and intellectual property protection are expected to become clearer in 4Q-2026. The impact on exports and FDI will depend on the scope of the measures, tariff rates, enforcement mechanisms, and how Vietnam is treated relative to competing countries.
Domestic funding pressure continues to push financing costs higher. At the same time, inflation is expected to remain above the State Bank of Vietnam's target of 4.5%, while pressure on the exchange rate is limiting the scope for monetary easing. Consequently, credit can continue to support economic momentum in the short term, but it cannot serve as the primary engine of 10% economic growth on a sustained basis without exacerbating systemic banking risks.

• The current account deficit and the real estate sector are two other key issues that could impact the economic trajectory

Vietnam risks posting its first current account deficit in four years, following a deficit of USD8.4 billion in 1H2026. The deficit was primarily driven by a trade balance that swung into negative territory, spurred by higher energy prices and surging imports fueled by robust domestic demand. Meanwhile, Vietnam's foreign exchange reserves stood at USD82.813 billion – equivalent to roughly 1.5 months of imports – reflecting a relatively limited capacity to absorb external shocks.
Although the real estate sector has recovered from the 2022-2023 downturn, the market continues to exhibit imbalances across prices, supply, and purchasing power. This is particularly evident in Hanoi, where housing prices and condominium supply have outpaced sales, leading to rising inventory levels and underscoring risks related to supply absorption. Notably, Hanoi's price-to-income ratio rose to 37.7 times in 1H2026, signaling a severe deterioration in housing affordability.
In conclusion, Vietnam's economy maintains robust momentum that is driven by FDI, exports, and consumption, but the quality of growth has become increasingly critical. Efforts to push GDP growth closer to 10% through aggressive credit expansion and investment are placing growing pressure on banks' funding capacity. At the same time, high levels of private sector debt and limited external buffers are making the economy more vulnerable to volatility.

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