5M26: Economic landscape turns gloomier as inflation accelerates

Vietnam’s economy continued to expand in May, but the underlying picture became increasingly challenging as the Middle East conflict remained unresolved. Inflation accelerated further, with elevated energy prices gradually spilling over into a broader range of goods and services, pushing up costs across the economy. Trade activity also came under pressure, as rising freight, insurance, and energy import costs contributed to a widening trade deficit. While retail sales continued to grow, part of the increase likely reflected higher prices rather than a meaningful improvement in consumer purchasing power. The main bright spot remained FDI, with both registered and disbursed capital posting strong growth. Overall, the economy is showing clearer signs of strain from persistent geopolitical tensions, and if the Middle East crisis drags on, these pressures could intensify and pose a more meaningful challenge to Vietnam’s growth outlook in the second half of the year.