The first eight months of 2026 presented a more optimistic economic outlook than the year’s initial months. However, beneath these favorable statistics lies a critical question: to what degree is this expansion building genuine new capacity for the economy?
Therefore, when evaluating the economic performance of the first eight months, the primary concern is not merely the rate of growth, but the manner in which it was achieved, the new capacity being generated, and the extent to which these benefits are distributed across the domestic economy. These factors should remain at the forefront of economic policy throughout the remainder of the year and the 2026-2030 period.
Industry accelerates
If one were to highlight the most significant positive indicator from the first eight months of 2026, it would be the clear acceleration in industrial production capacity. The Index of Industrial Production (IIP) climbed 1.5 per cent month-on-month in August and 14.4 per cent year-on-year. For the first eight months combined, the IIP for the manufacturing and processing sector grew by 12.5 per cent, marking a 2.5 percentage point increase over the same period last year and signaling a robust strengthening of production capacity.
Meanwhile, the Purchasing Managers’ Index (PMI) reached 53.3 points in August, its highest level since March and a 0.4-point increase from July. Both output and new orders continued to climb, with output growth reaching its fastest pace in over two years. As raw material supplies improved and production costs showed signs of stabilizing, the manufacturing sector appears to be entering the final months of the year from a relatively firm position.
However, a deeper analysis of the PMI reveals that new export orders fell in August, employment continued to shrink, and output expectations for the coming 12 months softened amid global geopolitical instability. This indicates that current production momentum does not necessarily signal the start of a solid new growth cycle. In short, supply capacity is expanding more rapidly than business confidence, a gap that requires careful monitoring by policymakers.
The August PMI reading of 53.3 points is encouraging, yet it should not be interpreted simply as evidence that the economy has safely surpassed the 50-point threshold. The composition of the index is more significant. While output and new orders rose, new export orders declined. Businesses maintained a cautious approach to hiring, and the outlook for the year ahead showed no substantial improvement.
The August PMI suggests that the economy’s production capacity is rebounding, bolstered by stronger aggregate demand and market confidence. Nevertheless, economic managers and policymakers should exercise caution when assessing the outlook for the final four months of the year. Should external demand falter while domestic demand fails to provide sufficient compensation, manufacturing growth could quickly hit its ceiling.
Consequently, policy should not focus exclusively on maintaining a PMI above 50 points. It must also prioritize the quality of orders, the potential for job creation, the stability of input costs, and the recovery of business expectations.
Business resilience remains a bottleneck
Sustaining high growth cannot rely solely on large-scale projects, as the vitality of an economy is ultimately reflected in the ability of its business community to survive, expand, and reinvest.
During the first eight months of the year, 138,100 new businesses were established, while 68,300 resumed operations. With an average of 25,800 businesses entering the market each month, this remains a positive signal.
Simultaneously, however, 157,400 businesses exited the market. Notably, in both July and August, the number of firms leaving the market surpassed the number of new entrants.
While this does not necessarily prove that the business sector is weakening—as some dissolved entities may have ceased operations earlier and were merely finalizing the formal closure process—it serves as a warning regarding business resilience, particularly as the recovery in domestic purchasing power remains sluggish.
The time has come to shift the focus from the quantity of new business registrations to the ability of firms to survive, grow, and enhance spending of remaining funds, but to fast-track projects with the greatest potential to boost productivity and generate spillover effects.
FDI surges
FDI remains one of the most promising aspects of the economic landscape. Total registered FDI reached $40.63 billion in the first eight months, a 55.4 per cent increase, while disbursed FDI hit $17.25 billion, up 12 per cent and the highest level for an eight-month period in five years. This is an important contribution to Vietnam’s integration into global value chains.
However, policymakers and economic managers must scrutinize the composition of these FDI flows. Of the $40.63 billion in registered FDI, $6.7 billion resulted from capital contributions and share purchases. Notably, $4.15 billion of this involved share-acquisition transactions that did not increase charter capital. These deals do not directly create new production capacity; rather, they represent shifts in the ownership of existing assets and productive capacity within the economy.
This does not imply that share-acquisition FDI is inherently negative. Such transactions can introduce new technologies, management expertise, and access to new markets and distribution networks. From a policy perspective, however, it is vital to distinguish between FDI that builds new capacity and FDI that merely changes the ownership of existing capacity.
Notably, approximately 30 per cent of the value of share acquisitions was concentrated in wholesale, retail, and the repair of automobiles and motorcycles. The challenge, therefore, is not just about investment capital but also concerns ownership structures and the ability to influence domestic distribution networks.
The policy objective should not be to restrict these capital flows but to elevate the standards used to evaluate FDI quality—ranging from value creation and links with domestic firms to technology transfer, competition, taxation, and sectors of strategic importance.
Consumption growth sluggish
While production and investment emerged as bright spots in the first eight months of 2026, domestic consumption remains a weak link.
Total retail sales of goods and consumer services revenue grew by 7.6 per cent during this period, just 0.1 percentage point higher than in the same period last year. Although average monthly retail sales have shown improvement, the pace remains insufficient to make domestic consumption a growth driver commensurate with the size of the economy.
International tourism is providing additional consumer demand. Vietnam welcomed approximately 15.9 million international visitors in the first eight months, an increase of 14.4 per cent. While international tourists can supplement domestic purchasing power, they cannot replace the need for a recovery in household incomes and consumer confidence among tens of millions of Vietnamese households.
For domestic consumer demand to become a genuine engine of growth, policy must simultaneously address employment, real incomes, living costs, consumer confidence, and access to quality services. Ultimately, sustainable growth must be reflected in the purchasing power of consumers and the ability of domestic businesses to expand their market reach.
Foreign trade gains momentum
In the first eight months, total merchandise trade reached $770.14 billion, up 28.7 per cent. This substantial volume underscores Vietnam’s significant role in global merchandise trade. Imports totaled $395.3 billion, up 35.3 per cent, while exports reached $374.84 billion, up 22.4 per cent, resulting in a trade deficit of $20.46 billion for the period.
More notable is the high concentration of trade within a limited number of product groups and markets. Electronics, computers, and components accounted for 40.88 per cent of the economy’s total import value in the first eight months, generating a deficit of $60.57 billion.
The US accounted for 32.5 per cent of total exports, while nearly 41 per cent of total imports originated from China. These figures demonstrate that while Vietnam’s merchandise trade is expanding rapidly, its heavy reliance on a few markets remains a concern. The strength of domestic capabilities and the economy’s ability to retain value domestically remain major questions.
Not all imports are cause for concern, of course. Imports of machinery, equipment, components, and raw materials can be essential inputs for growth. The issue arises when imported inputs grow faster than domestic supply capacity, leaving the economy heavily dependent on external supply chains.
Therefore, the challenge for the next phase is not simply to reduce imports, but to gradually lower the import content embedded in each unit of value-added in exported products.
In other words, Vietnam needs to shift its focus from increasing export turnover to increasing the value retained domestically from those exports.
The clearest positive signal in merchandise trade occurred in August, when the trade deficit narrowed to just $120 million, the lowest level since the start of the year. Compared with the $3.59 billion deficit posted in July, the August figure was down by more than 96 per cent. This is a significant improvement, indicating that export growth and the balance between exports and imports became more favorable toward the end of August.
However, the August result must be viewed within the broader context of the first eight months. With the trade deficit reaching approximately $20.46 billion, the economy remains in a position where imports are growing faster than exports. Therefore, while the sharply narrower deficit in August is encouraging, it is not yet enough to conclude that trade deficit pressures have been resolved.
Inflation headroom narrows
The CPI rose 3.57 per cent in August from December 2025 and 4.89 per cent year-on-year, while the eight-month figure increased 4.45 per cent from the same period last year. This means the remaining room relative to the full-year inflation target of 4.5-5 per cent is becoming increasingly limited.
It is noteworthy that inflationary pressure is not driven solely by consumer demand. Raw material prices, production costs, energy prices, exchange rates, and unpredictable developments in international markets could all impact the price level in the closing months of the year. This necessitates increasingly close policy coordination. Growth must be supported, but not at any cost.
Public investment needs to accelerate, but capital concentration must not create excessive pressure on material prices. Credit must support production while being accompanied by risk controls. The exchange rate must remain sufficiently flexible to support exports without adding to imported inflationary pressure.
The objective, therefore, is not to choose between growth and stability, but to identify the highest sustainable rate of growth within the limits of macroeconomic stability.
Growth constraints
Overall, the economic picture for the first eight months shows that the economy has strengthened its growth capacity, while also revealing several increasingly clear constraints.
First, production capacity is expanding faster than domestic demand. Second, the scale of international merchandise trade and FDI is growing faster than the economy’s ability to increase domestic value-added and strengthen its internal capabilities. Third, investment is increasing, but the need to convert capital into higher productivity and new capacity is becoming increasingly urgent. And fourth, the number of businesses entering the market remains substantial, but the resilience of the business sector remains fragile.
These constraints are not four separate groups of difficulties. Together, they convey a broader message: if these issues are not addressed, they could undermine the quality of growth and reduce the economy’s resilience.
This is why the closing four months of the year should be viewed not simply as the final stretch toward meeting Vietnam’s 2026 growth target, but as a critical period for strengthening the foundations of a higher new growth trajectory.
From driving growth to improving quality
The signals from the first eight months of 2026 suggest that economic management in the final four months should not focus on creating more growth drivers, but on converting existing drivers more effectively into domestic economic capacity.
First, public investment should be directed toward areas that create new capacity and generate the greatest spillover effects, rather than simply pursuing higher disbursement rates.
Second, strengthening domestic purchasing power should become part of the growth strategy through employment, incomes, and consumer confidence, rather than focusing solely on increases in total retail sales of goods and consumer services revenue.
Third, domestic businesses should be placed at the center of efforts to improve productivity, as they are the key force determining the economy’s ability to retain value domestically.
Fourth, FDI flows should be assessed not simply by the amount of capital registered but by the new production capacity created, the value-added generated and retained domestically, links with local businesses, technology transfer, and their contribution to long-term competitiveness.
Fifth, international merchandise trade policy should shift decisively from the goal of increasing export turnover toward raising domestic value-added, developing support industries, diversifying markets, and gradually reducing dependence on a limited number of supply chains.
Above all, macroeconomic management requires close coordination between growth and stability. One percentage point of growth achieved at the cost of inflation, greater import dependence, or weaker economic resilience is not necessarily one percentage point of high-quality growth.
The economic picture for the first eight months is both encouraging and thought-provoking.
The economy has demonstrated its ability to expand production, attract capital, accelerate investment, and maintain rapid growth in merchandise trade despite considerable uncertainty in the global economy.
Yet the growth drivers and the capabilities needed to retain the benefits of that growth have not developed at the same pace. This is precisely where policymaking and implementation should focus in the period ahead.
In the closing months of this year and throughout the 2026-2030 period, the most important question is not simply how many percentage points Vietnam’s economy grows. More important is how much additional production capacity, productivity, domestic value-added, and resilience to external shocks the economy creates with every percentage point of growth.
If production increases but domestic businesses do not grow accordingly; if exports rise without a corresponding increase in the value retained domestically; if investment disbursement accelerates without generating new capacity; or if FDI expands while links with the domestic economy remain weak, growth may still be high but the foundations of that growth will not necessarily have strengthened to the same extent.
Conversely, if every flow of capital is converted into new capacity, every investment project into productive capacity, and every market opportunity into greater competitiveness, while domestic businesses gain the ability to participate more deeply in global value chains, growth will do more than expand GDP—it will strengthen the economy itself.
This, perhaps, is the most important measure of the quality of growth, and the deeper meaning of Vietnam’s development journey from 2026 to 2030: not simply meeting annual growth targets but turning this year’s growth into the capacity for tomorrow’s development.
Originally reported by en.vneconomy.vn. This article has been independently rewritten for republication.
