Growth in the Index of Industrial Production in the first then month was sufficient to encourage companies to hire additional staff and bolster their raw material inventories.

The latest figures from the National Statistics Office at the Ministry of Finance
(MoF) show that Vietnam’s Index of Industrial Production (IIP) in October was estimated
to have risen 2.4 per cent against September and 10.8 per cent year-on-year. Over
the first ten months of 2025 the IIP is estimated to have grown 9.2 per cent year-on-year.

Driving expansion

The manufacturing and processing sector remained the main engine of industrial
growth, rising 10.5 per cent year-on-year in the first ten months compared with
9.5 per cent in the same period of 2024. The sector contributed 8.5 percentage points
to overall 9.2 per cent growth, underlining its pivotal role in the national industrial
structure.

Growth was also strong in key secondary industries, with many recording significant
increases, reflecting both higher market demand and improved production capacity.

Industrial production rose in all 34 cities and provinces nationwide in
the period, with some localities posting particularly high growth in manufacturing
and processing compared to the same period last year.

The industrial workforce also grew steadily. As of October 1, the number of
employees in industrial enterprises had increased 0.8 per cent from the previous
month and 3.6 per cent year-on-year. State-owned enterprises recorded a 0.1 per
cent monthly rise and 2.6 per cent year-on-year; while foreign-invested enterprises
saw 0.9 per cent monthly growth and 4.1 per cent annually. These figures suggest
that business confidence in production and growth prospects continues to strengthen.

PMI jumps as new orders surge

One of the key indicators of industrial growth is the Purchasing Managers’
Index (PMI). In a report released in early November, SP Global put Vietnam’s
PMI in October at 54.5, a sharp increase from 50.4 in September, signaling strong
improvement in the health of the manufacturing sector.

The driver behind this breakthrough growth was a significant rise in both production
and new orders. Specifically, new orders increased at the fastest pace since July
2024, supported by stronger customer demand. Notably, new export orders also rose
for the first time in a year.

To meet the surge in new orders, manufacturers ramped up production, marking
the strongest output increase since July 2024. Production has now expanded for six
consecutive months. Alongside rising output, companies expressed greater optimism
about the next 12 months, with business sentiment reaching a 16-month high, fueled
by expectations that new orders will continue to grow and production capacity will
expand accordingly.

“Rising new orders and the accompanying increase in production also led to
higher employment in October, marking the first rise in over a year,” SP Global
noted in the report. “Manufacturers added staff to cope with emerging pressures
on operating capacity.” The report also highlighted that rising new orders and production
requirements encouraged companies to increase purchasing activity, marking the fourth
consecutive month of such growth.

According to Mr. Andrew Harker, Economics Director at SP Global Market
Intelligence, the positive aspect is that growth was strong enough for companies
to hire additional staff and build up raw material inventories. However, it remains
to be seen whether this growth can be sustained in the months ahead.

Manufacturing fuels FDI growth

As of October 31, manufacturing and processing had received the largest amount
of newly-licensed FDI, with registered capital reaching $7.97 billion, accounting
for 56.7 per cent of total newly-registered capital and asserting the sector’s role
as the main driver of FDI attraction. Total registered FDI in the sector stood
at $16.37 billion, representing 62.5 per cent of total newly-registered and additional
capital.

FDI inflows into manufacturing and processing are not only growing in volume
but also in quality, as reflected in disbursed capital. According to the NSO, actual
FDI disbursement in the first ten months across the economy was estimated at $21.3
billion, up 8.8 per cent year-on-year and the highest level in this period for the
past five years. Manufacturing and processing accounted for $17.68 billion, or 83
per cent, of total FDI disbursement.

Experts noted that Vietnam’s appeal among foreign investors in the sector is
driven by multiple factors: political stability, a favorable geographic location,
competitive costs, improved logistics infrastructure, and increasingly-sophisticated
production capacity. In addition, global supply chain shifts, where multinational
companies move part of their operations from China to other countries, continue
to benefit Vietnam, positioning the country as a “new manufacturing hub”.

Despite strong FDI inflows and the continued leadership of manufacturing and
processing, the Foreign Investment Agency at the MoF cautioned that risks remain
if the electronics and component supply chain experiences disruptions. Large FDI
inflows in the sector have made Vietnam an important link in the global supply chain
over the last few years.

At a recent seminar gathering expert advice on socio-economic trends, organized
by the National Assembly’s Committee for Economic and Financial Affairs, experts
highlighted two factors likely to affect FDI flows in the coming period: the Global
Minimum Tax and changes in supply chains at both international and regional levels.
Additionally, the US’s reciprocal tariffs policy could also significantly influence
FDI relocation trends.

To maintain its appeal, Vietnam needs to facilitate investment by continuing
to reform administrative procedures to speed up licensing and reduce pre-investment
costs. At the same time, alternative support mechanisms should be applied in place
of tax incentives. Specific supportive measures with significant room for implementation
include facilitating access to land and business premises; supporting infrastructure
and social housing in and near industrial parks; simplifying visa and work permit
procedures; and providing workforce training.

VET-Manh Duc