Stepping up the fiscal policy to support the economy in 2026

The world is undergoing a period of profound transformation. Technology, capital flows, security, and social structures are all being reshaped simultaneously. As strategic competition between the United States and China intensifies and the era of globalization gradually draws to a close, the global economy is entering a complex transition phase unfolding across multiple dimensions, said Paik SeokHyun, Senior Economist at the Solutions and Trading Center of Shinhan Bank.

Shifts in the international environment are driving tangible changes in the global financial and monetary landscape. One notable development is the weakening dominance of the US dollar, reflected in the expansion of non-USD payment systems such as the Chinese yuan, the Russian ruble, and digital currencies.

Financial digitalization, including the institutionalization of central bank digital currencies (such as the digital yuan, the digital ruble, and the digital euro), alongside other digital currencies, could lead to a reshaping of the global monetary order.

Capital flows are also becoming more volatile. High interest rates in emerging markets are putting pressure on capital outflows, while at the same time, these economies must diversify supply chains to sustain foreign direct investment (FDI).

Socioeconomic changes are accelerating amid deglobalization and supply chain restructuring. Semiconductors, batteries, and critical minerals are increasingly viewed as strategic resources, alongside the growing trend of “friendshoring,” whereby supply chains are relocated to allied countries.

Demographic structures are also shifting. Developed economies are facing population aging, while emerging markets such as India and African countries are experiencing rapid growth in young populations, contributing to a relocation of global growth centers.

Inequality and social polarization are on the rise, driven by artificial intelligence, capital concentration, political populism, and social tensions associated with deglobalization.

These global shifts are also producing significant impacts on Viet Nam. One of the most notable changes is the evolving composition of exports. Since May 2025, exports by domestic Vietnamese enterprises have declined, while exports by foreign-invested enterprises have surged. This trend stems from the United States’ tightening of tariffs and stricter enforcement of rules of origin. The imposition of a 40% tariff on goods not genuinely originating in Viet Nam—particularly those transshipped from third countries such as China and South Korea—has had a severe impact on many domestic firms.

According to Paik SeokHyun, many small-scale domestic enterprises have yet to clearly separate production from processing activities and remain heavily reliant on transshipment or indirect export arrangements. As a result, they have become subject to heightened scrutiny by US customs authorities.

In response, Viet Nam has undertaken and continues to pursue governance-oriented economic reforms. Regulations affecting businesses and workforce development also need improvement. This underscores the urgent need to enhance governance efficiency, institutional transparency, anti-corruption efforts, the business environment, and labor market functioning in order to progress toward high-income status. Major international institutions—including the IMF, World Bank, and ADB—forecast that Viet Nam’s economic growth in 2026 will slow compared to 2025, but remain among the highest in the region, Paik noted.

The primary drivers of this slowdown stem from external factors, including tariffs, trade restrictions, global economic deceleration, and deglobalization trends.

Against this backdrop, domestic private consumption and public investment are expected to play a critical role in sustaining growth. Strengthening domestic demand will be essential, the Shinhan Bank expert emphasized.

Regarding monetary and foreign exchange policy, Paik observed that the State Bank of Viet Nam (SBV) appears to prioritize exchange rate stability over export competitiveness. Since 2022, Viet Nam has maintained a stance aimed at defending the value of the VND amid depreciation pressures.

Since the second term of the Trump administration, the SBV has adopted a cautious and vigilant approach toward VND depreciation, reflecting concerns that the US could once again label Viet Nam a “currency manipulator”—a designation previously applied in December 2020.

However, based on the criteria used to assess and assign such a designation, the expert assessed the likelihood of Viet Nam being relisted as low.

After President Trump announced a 46% tariff on Vietnamese goods on “Liberation Day” (April 2, 2025), the two sides later reached an agreement to reduce the rate to 20% in July. US protectionist policies have placed particular pressure on the VND. While depreciation is a reasonable market response, the pace has been rapid, raising the likelihood of a corrective and recovery phase in the near term.

Although the VND weakened significantly in 2025, it is expected to stabilize and recover gradually toward the end of the year, supported by external factors.

With interest rates near historic lows, room for monetary policy easing is limited. Viet Nam is therefore likely to rely more heavily on fiscal policy—particularly increased public investment—to support economic growth in 2026, the expert said.

Viet Nam is expected to maintain solid growth while moving toward financial stability. The weakening trend of the VND is projected to persist, but at a moderated pace. A non-performing loan (NPL) ratio of around 5% underscores the urgency of resolving bad debts and increasing bank capital. Continued reform momentum—in institutions, the private sector, artificial intelligence, and semiconductors—is expected to help manage VND depreciation and maintain macroeconomic stability, Shinhan Bank forecasts.

According to Shinhan Bank’s projections, the USD/VND exchange rate is expected to reach:

• December 2025: 26,342 VND;
• End of Q1 2026: 26,100 VND;
• End of Q2 2026: 26,200 VND;
• End of Q3 2026: 26,300 VND;
• End of 2026: 26,400 VND.