Vietnam was one of the bright spots in ASEAN last year and expanded at the fastest pace since 2007 on the back of solid domestic demand and export growth. However, Vietnam was unable to carry the positive momentum into the first quarter of this year as the most severe drought in recent history hampered agricultural production and caused economic growth to decelerate. Drought conditions in Vietnam’s agricultural regions persist and are set to have an impact on rice and coffee output with the former expected to drop for the first since 2005. Other sectors of the economy have not been affected by the inclement weather and data confirm that the country’s macroeconomic fundamentals remain robust. In May, industrial production grew solidly and the Manufacturing PMI reached its highest reading in one year.