Expanding trade surplus aids growth

Vietnam expects a bright export picture for 2018, driven by the key export items of phones and electronic components, textiles and garment and footwear, as well as a growing trade surplus despite protectionist measures coming into effect across the globe.

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According to the Ministry of Industry and Trade (MoIT), exports may reach about US$240 billion by the year’s end, an 11.2% increase over 2017.

Some 26 export commodities brought in more than US$1 billion in export value between January and September, making up 90.3% of the country’s total export revenue.

Under that, foreign-invested enterprises (FIEs), with electronics taking the lead, are expected to continue occupying the lion’s share of Vietnam’s exports over the next few years.

The development of Vietnam’s electronics industry is attributed to the large investments from multinational corporations, especially those from the Republic of Korea (RoK) and Japan, in the field of manufacturing electronic components. Vietnam is now becoming a big electronics production base for foreign firms like Samsung and LG, Canon, Panasonic, Daikin, and Intel.

Electronics is the largest export sector of Vietnam. The sector’s export turnover has grown from US$22.9 billion in 2012 to more than US$71 billion in 2017. It is now 2.5 times and five times greater than textiles and footwear sectors, respectively.

Regarding garment and textile, according to the Vietnam Textile and Apparel Association (Vitas), the industry’s exports are forecast to reach US$35 billion this year, higher than the target set at the beginning of the year, thanks to a large number of orders from foreign partners and bright prospects of the world and domestic economies.

In 2017, the sector raked in US$31.2 billion from exports, a year-on-year rise of 10.23%.

The Vitas explained that Vietnam’s participation in free trade agreements and the large investments in the industry by foreign and domestic firms have helped to increase the localisation rate of the industry, leading it to become one of the industries with strongest increases in export values over the years.

The four markets of Japan, China, the US, and the RoK account for 75% of the total exports of garments and textiles, which posted an annual growth rate of more than 20%. The US remains the largest importer of Vietnamese garments and textiles, occupying nearly 40% of the industry’s total export value.

In addition, it is worthy to note that Vietnam’s trade surplus continues expanding, which was attributed to the large trade surplus in FIEs.

According to the latest report of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI), in the first 10 months of this year, FIEs witnessed a trade surplus of US$27.105 million as their exports reached US$126.735 million (including crude oil).

Nguyen Chi Dung, Minister of Planning and Investment, stressed in the MPI’s report delivered to the National Assembly (NA) that the trade balance has shifted from deficit to surplus in three consecutive years, contributing to improved macroeconomic stability, while promoting economic growth in the first three years of the 2016-2020 development period.

In total, Vietnam witnessed a trade deficit of US$3.54 billion in 2015, but it gained a trade surplus of US$2.52 billion and US$2.92 billion in 2016 and 2017, respectively.

According to the government, Vietnam will likely witness a total export-import turnover of US$475 billion this year-up 11.7% on-year, including US$238 billion for exports and US$237 billion for imports. This will lead to a trade surplus of US$1 billion for 2018.

The MPI explained that not only due to FIEs, the recent trade surplus has been induced by the restructuring of the economy as the proportion of industry, especially manufacturing, increased while mining declined. The economy is no longer dependent on the exploitation of natural resources.

It is expected that Vietnam will achieve an increase of 7-8% in the total import-export value next year, while keeping the trade deficit below 3%.

However, expert Le Dinh An expected the government to continue to keep the trade deficit in check, and that although Vietnam has reported a trade surplus recently, this is still not sustainable as domestic production depends heavily on imported raw materials.

The International Monetary Fund reported that strong economic momentum is expected to continue in 2018, aided by reforms, higher potential output, global recovery, and the government’s commitment to uphold macro-economic and financial stability. 
VIR

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