Rising Costs Pile Pressure on Vietnam Businesses

HO CHI MINH CITY: After a prolonged period at low levels, lending rates at banks have begun to edge up again, placing a heavier burden on borrowers, both individuals and businesses. Amid ongoing tensions in the Middle East, which have driven up logistics and input costs for manufacturers, rising capital costs are further amplifying financial pressure, forcing many firms to stretch resources to sustain operations.

The rapid increase in borrowing costs within a short period has raised concerns across the economy, particularly as interest rates may continue to trend upwards.

The Mortgage Squeeze

For Nguyen Thanh and his wife in Ho Chi Minh City's Tan Phu Ward, the impact of rising rates has been immediate and alarming. After one year at a preferential interest rate, their mortgage shifted to a floating rate in November 2025. While the rate previously stood at 6.9%, it rose to 11.9% following the adjustment. Three months later, it was revised again to 12.8%.

The rapid escalation has raised concerns for the couple, especially as interest rates may continue to trend upwards. For many Vietnamese households, mortgage payments represent a significant portion of monthly expenses, and the sharp increase in borrowing costs is straining household budgets across the country.

Manufacturers Feel the Pinch

The pressure is not limited to retail borrowers. Manufacturing enterprises are also facing similar challenges as lending rates are being adjusted upwards across the board.

Nguyen Dình Tung, general director of Vina T&T Group, said tensions in the Middle East are having serious repercussions for agricultural exports, particularly supply chain disruptions and sharp increases in maritime transport costs. At the same time, businesses are also grappling with rising bank lending rates and higher input costs, he said.

The market had already recorded tighter credit limits by the end of 2025, and lending rates have continued to rise since early this year, he said. Loans that previously carried an interest rate of around 6% are now at 8% and are likely to rise further.

A Brutal Impact on Wood Industry

Phung Quoc Man, chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (Hawa), described the interest rate pressure as "brutal" . Lending rates for businesses are now 11% to 12%, while previously they could borrow at 6% to 7%. Hawa officials said this poses a challenge to businesses, many of which rely on credit to finance raw material imports and maintain production.

Borrower Type Previous Rate Current Rate Mortgage Borrower 6.9% 12.8% Manufacturing Loans 6-7% 11-12%

A Call for Government Action

Policymakers should consider appropriate measures to help enterprises access funds at more reasonable costs to ensure production and business activities remain unaffected, said Phung Quoc Man . Without intervention, the combination of rising lending rates, higher input costs, and supply chain disruptions could force many businesses to scale back operations or even close.

Vietnam's businesses and households are caught between rising global tensions and climbing domestic lending rates. The Middle East conflict has driven up logistics and input costs, while banks have tightened credit and raised interest rates, squeezing margins for manufacturers and stretching household budgets for mortgage holders.

For businesses, the situation is particularly acute. The wood industry, a key export sector, is facing lending rates nearly double what they were just a year ago. For households, the rapid escalation of mortgage rates is raising concerns about financial stability and the risk of default.

Policymakers will need to strike a delicate balance between controlling inflation and supporting economic growth. Without intervention, the pressure on businesses and households could intensify, potentially slowing Vietnam's economic recovery and undermining the country's competitiveness in global markets.

The coming months will be critical as the government considers measures to help enterprises access funds at more reasonable costs and support households struggling with rising borrowing costs. The outcome will shape Vietnam's economic trajectory for years to come. As one industry leader put it, "This is a brutal time for businesses, and we need support to get through it." The government's response will determine whether Vietnam can navigate these challenges and emerge stronger on the other side.