Economic Outlook for Vietnam: Interest Rates and Exchange Rates Under Pressure

Economic

Forex

Summary:

Vietnam's economy faces rising challenges as the credit growth remains high, and the exchange rate pressures persist, which are expected to push interest rates upward by the end of 2025..

Vietnam’s Economic Pressures: Rising Credit, Exchange Rate, and Interest Rates

As of late August 2025, Vietnam’s credit growth has been strong, reaching 17.14 trillion VND (about 17.14 million VND), reflecting an 11.08% increase from the previous year. With expectations for credit growth to reach 20.19% this year, it remains one of the highest growth rates in recent years, exceeding the average of 14.5%.

While the average interest rate for new loans stands at 6.38%, nearly 0.6% lower than the previous year, the rising credit and exchange rate pressures are expected to influence interest rate trends toward the end of the year.

Exchange Rate and Currency Demand Concerns

In August 2025, the exchange rate of the Vietnamese đồng came under pressure, resulting in a shift towards foreign currency due to lower interest rates in Vietnamese đồng. The demand for foreign exchange is expected to rise due to the delayed disbursement of foreign loans and the increase in foreign debt obligations.

Despite expectations that the U.S. Federal Reserve might reduce interest rates by the end of the year, local challenges, including higher import demand as tariffs on goods from the U.S. have been reduced, are expected to keep the exchange rate "hot," putting pressure on the local currency.

Rate Predictions and Economic Impact

The market expects the exchange rate to range between 26,600 and 26,750 VND/USD by the end of 2025, reflecting a 4.5% to 5% increase compared to earlier in the year. The country’s credit growth continues to outpace capital mobilization growth, which adds further pressure on interest rates, particularly for private commercial banks competing for deposits.

By the end of July 2025, 12-month deposit rates for private commercial banks had risen slightly to 4.89%, a 2 basis point increase compared to the previous month. In contrast, the state-owned commercial banks have maintained a stable rate of 4.7%.

Policy Measures and Future Adjustments

The State Bank of Vietnam (SBV) has consistently emphasized stabilizing both interest rates and exchange rates, alongside efforts to manage inflation. To this end, the SBV is encouraging a more flexible and efficient monetary policy to balance interest rates and currency exchange, while maintaining control over the foreign exchange market.

In the upcoming period, the SBV will also focus on improving the efficiency of credit programs aimed at supporting housing, infrastructure, and digital technology development. These efforts aim to keep inflation in check and ensure stable growth while accommodating the country’s growing credit needs.

Vietnam’s economic strategy for the remainder of 2025 involves managing a delicate balance between stimulating growth and addressing inflationary pressures. High credit growth, exchange rate concerns, and increased tariffs could push interest rates higher, but with the SBV’s targeted policy measures, the country aims to stabilize its economy while managing external challenges.

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