Global risks leaving export target on edge

The government last week required the Ministry of Industry and Trade (MoIT) to find solutions to raise exports and closely control imports, and take advantages of commitments in signed free trade agreements to expand export markets.

The MoIT was also ordered to direct Vietnamese trade offices overseas to seek more information and demands from the markets where they are located, with a view to timely providing consultancy for the government and the prime minister on how to swell exports.

In the first seven months of this year, Vietnam’s total goods export and import turnover is estimated to be US$374.23 billion – down 13.9% year on year “due to colossal difficulties in the global market,” according to the MoIT.

This includes US$194.73 billion worth of exports – down 10.6%, and US$179.5 billion for imports – down 17.1%. The total trade surplus hit US$15.23 billion, over 11 times higher than that of US$1.34 billion in the same period last year.

The MoIT earlier set a target of US$775 billion in total goods export-import revenue this year – up by 6% from 2022. This includes US$394 billion for exports and US$381 billion for imports, with a trade surplus of US$13 billion.

The Ministry of Planning and Investment (MPI) has warned of big risks in the global markets, which could affect the Vietnamese economy, mostly exports.

“The domestic economy is quite open to the global economy, with the country’s total export-import turnover nearly double its GDP. Thus, it is prone to be vulnerable to external shocks,” said an MPI report sent to the government.

Vietnam’s GDP reached US$409 billion last year when its total goods export-import turnover was 1.79 times higher, hitting US$732 billion.

MoIT Deputy Minister Do Thang Hai said that many large economies that are Vietnam’s export partners, such as the US and Europe, have been reducing spending on ordinary and luxury items.

“This has led to a fall in Vietnam’s export orders, while the country’s industrial sectors are largely export-oriented, relying on the global market as domestic outputs has far exceeded the domestic demand,” Hai said. “Especially when it comes to sectors such as garments and textiles, footwear, aquatic products, and electronics, only 10% are consumed at home, and the remaining 90% are for export.”

In an example, mobile phones and spare parts, with about 90% from the Republic of Korea (RoK)’s Samsung, are reported to have reached a seven-month export turnover of US$27.8 billion, down 18.3% as compared to the same periold last year.

Meanwhile, electronics, computers, and their spare parts, which are largely produced by FIEs such as Samsung, LG, Jing Gong, Daewoo Vietnam, and Genesistek Vina, have hit a total seven-month export turnover of US$30.79 billion – down 3% year on year. However their exports in July rose by 32% year on year.

In another case, the Vietnam Association of Seafood Exporters and Producers (VASEP) reported that in the first seven months, total aquatic exports hit only US$4.95 billion, down 25.4% year on year.

High inflation in many nations has forced consumers to tighten their belts. Thus, aquatic exports have reduced remarkably in many key markets, including Japan, RoK, and the EU. Meanwhile, the US and China have begun to resume imports, but activities remain feeble, the VASEP said.

“The global economy is embarking upon a new period brimful of risks and challenges coupled with a danger of economic recession,” the MoIT said in its report on Vietnam’s industrial production and export situation released over a week ago. “High inflation and interest rates have resulted in a slash in consumption in many nations worldwide, including Europe and the US, which are major trade partners of Vietnam.”

According to the Asian Development Bank (ADB), as growth slows this year, forecasts for major advanced economies are revised marginally up for 2023 and significantly down for 2024, and this will affect Vietnam’s exports and growth.

Following a decent Q1 in the US, interest rate hikes and weaker consumer confidence have stalled the economy and undermined investment, and may continue to do so. Meanwhile, with the eurozone having entered a technical recession, the global slowdown further restrains exports and investment in Japan.

“Exports and industrial activity in developing Asia continue to decelerate as global demand slows. In the year to date, exports from key technology exporters declined sharply, while weaker demand also held down exports from the rest of the region,” the ADB said.