Trade surplus expected for 2019

The General Statistics Office (GSO) reported that in the first nine months of this year, despite headwinds in the global market causing a reduction in consumption and imports, the economy witnessed a US$5.9 billion trade surplus, with total export turnover of US$194.3 billion, up 8.2% year-on-year.

TradingEconomics, a global provider of economic indicators, released its fresh econometric calculation last week, indicating that Vietnam may reap a big trade surplus this year.

“Looking forward, we estimate the balance of trade in Vietnam to stand at US$2 billion in 12 months’ time. In the long-term, the figure is projected to trend around US$1.6 billion in 2020, according to our econometric models,” the firm said.

TradingEconomics’ optimistic projection on Vietnam’s trade this year is based on the country’s strong exports since early this year, notably including a surge in electrics exports, and positive impacts from free trade agreements (FTA) including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam FTA (EVFTA) which have led to a rise in foreign direct investment, a major part of which is focused on export-oriented manufacturing.

According to the Ministry of Industry and Trade’s (MoIT) latest report on Vietnam’s industrial production and exports, there are many favourable factors to help Vietnam boost its exports from now until the year’s end (see box) and continue to enjoy a trade surplus this year.

One of the key drivers of the nine-month exports is the boosted shipment of electronics items led by Samsung, LG, and Canon.

Specifically, in the first nine months of the year, exports of mobile phones and their spare parts reached US$38.6 billion, accounting for 19.9% of Vietnam’s total export turnover, and up 5.1% year-on-year. In addition, the export turnover of computers and their spare parts hit US$25.4 billion, up 16.9.3% year-on-year.

“Samsung’s products will continue greatly supporting the domestic phone manufacturing industry to develop stronger in the third and fourth quarters of the year, with the Thanksgiving and Christmas holidays being peak shopping seasons in the country,” stated the MoIT report. “At present, the business and production plans of Samsung and LG in Vietnam are going well.”

According to the MoIT, production of electronics and electric items has been strongly recovering since the second quarter of the year. For example, in August alone, the index of industrial production of this industry grew 20.1% month-on-month and 5% year-on-year.

“This is a very positive signal of this industry following its year-on-year minus growth in the first six months of 2019,” stated MoIT Deputy Minister Cao Quoc Hung. “The key reason is Samsung having launched its high-end Galaxy Note 10 and Galaxy Note 10+ smartphones, and boost exports.”

The products come with upgraded specifications and 5G support, Samsung said, with a suggested retail price of VND22.99 million (US$1,000) and VND26.99 million (US$1,170) for the Note 10 and 10+, respectively.

At a recent government press conference, government spokesperson Mai Tien Dung cited Prime Minister Nguyen Xuan Phuc, noting that not only has there been a continued climb in exports led by foreign-invested enterprises but exports created by Vietnamese firms have also been increasing strongly.

“Following their relatively-high growth in 2018, domestic enterprises have continued painting a rosy export picture in the first eight months of 2019, with a year-on-year growth rate of 13.9%, nearly doubling the economy’s export growth of 7.3% year-on-year, and tripling the 4.6% growth rate recorded by foreign enterprises,” Dung said. “It is expected that 2019 will continue seeing a big trade surplus.”

According to the GSO, in the first nine months of this year, Vietnamese enterprises created US$59.57 billion in export turnover, up 16.4% year-on-year, and holding 30.7% of the economy’s total export turnover, up from 28.8% in the same period last year. Meanwhile, foreign-invested enterprises generated US$134.73 billion, up 5% year-on-year and accounting for 69.3% of the economy’s total export turnover.

According to Minister of Planning and Investment Nguyen Chi Dung, until the year’s end, the economy will have more opportunities to boost exports thanks to spillover effects from free trade agreements including the CPTPP and the EVFTA.

“These agreements have helped further strengthen the confidence of investors and enterprises in conducting business and production in Vietnam, especially in the manufacturing and processing sector, creating a solid propellant for businesses to boost exports and for the whole economy to reap greater trade growth including a big trade surplus in 2019,” he stated.

Last year, Vietnam harvested a high trade surplus of US$7.21 billion despite the US-China war dampening global demand.

Notably, over the past year, while the US and China, which are the largest export markets of Vietnam, have been engaging in duelling import tariff impositions, Vietnam’s exports to the US market remain on an uptrend and those to China have slightly decreased.

Specifically, in the first nine months of 2019, total export turnover from the US, which is the largest purchaser, was US$44.9 billion, up 28.2% year-on-year, and that from China, which is the third largest buyer, totalled US$27.8 billion, down 3.8% year-on-year.