Vietnam’s flourishing trade gaining new momentum

The Vietnamese export-import landscape is regaining major momentum thanks to local production bouncing back and recovering demand from the global market. However, looming risks remain, affecting the trade outlook for the entire economy.

Vietnam has witnessed a positive trade landscape, with companies’ performance bouncing back.
Vietnam has witnessed a positive trade landscape, with companies’ performance bouncing back.

Since early this year, Hanoi Garment and Textile Materials JSC has witnessed a 15% climb in export orders from the Republic of Korea, which held as much as 40% of its export value last year and 45% in the first seven months of 2022.

“We have also amplified exports to the European and Japanese markets, in addition to the Republic of Korea, and we are now negotiating more orders for the last quarter of this year and the first quarter of next year,” said the company’s representative Nguyen Viet Thang.

Last week, the Vietnam Textile and Apparel Association (VITAS) reported that the 7-month export value of the textile and garment sector is estimated to have reached 26.55 billion USD, up 16.5% year on year, while the total import turnover of materials in the period is estimated to have hit 15.48 billion USD, up 7.9%. The industry raked in a trade surplus of 11.07 billion USD in the period, representing a year-on-year expansion of 31%.

“Garments and textiles have become one of the sectors earning the most money for the economy since early this year,” said Truong Van Cam, vice chairman of VITAS, adding that “The garment and textile sector has set an export turnover goal of 43-45 billion USD for this year. Over 60.3% of this target has been met and more efforts will be made to realise this target.”

In another case, Phan Thi Thanh Xuan, vice chairwoman of the Vietnam Leather, Footwear and Handbag Association, said that the sector’s total export turnover reached 13.8 billion USD in the first half of 2022 - up 14%, including 11 billion USD for footwear exports – up 13%, and more than 2 billion USD for suitcase and handbag exports– up 20%.

“Exporters have increased their export markets to countries that have inked free trade agreements with Vietnam. The sector has set an export target of around 20 billion USD in 2022,” Xuan said.

Also, according to the Ministry of Agriculture and Rural Development, the total 7-month agro-forestry-fishery export turnover is estimated to have reached more than 32.3 billion USD, up 12,2% compared to that of the same period last year. Of which, agricultural products earned 13.3 billion USD – up 8.8%, forestry products reached over 10.4 billion USD – up 1.3%, aquatic products hit 6.7 billion USD – up 34.2%, and other products took in 1.9 billion – up more than 60%.

Recovery

Export-import activities in Vietnam have taken place brightly, with businesses raising their exports on the back of recovering demand from foreign markets along with increasing imports to serve their domestic production.

The Ministry of Industry and Trade (MoIT) reported that in the first seven months of this year, garments and textiles; footwear and bags; and agro-forestry-fishery are among the 28 categories of exports fetching export value of more than 1 billion USD, and among the five categories of exports with export turnover of over 10 billion USD.

Vietnam’s export-import turnover in the first seven months of the year is estimated at nearly 432 billion USD, up 14.8% compared to that in the corresponding period of last year, with a trade surplus of as much as 764 million USD. The export and import turnover of goods stood at 216.35 and 215.6 billion USD - up 16.1 and 13.6%, respectively.

In the structure of exports for the first seven months, domestic enterprises raked in 56.99 billion USD, up 17% year on year – accounting for 26.3% of the economy’s total export turnover, while foreign firms fetched 159.36 billion USD (including crude oil exports) - up 15.7% and accounting for 73.7%.

“The fact that domestic businesses earned a bigger increase (17%) than that of foreign companies (15.7%) shows that Vietnamese firms are making greater efforts to recover their production and business activities and to resume supply chains given that the pandemic remains complicated,” said an MoIT report on Vietnam’s 7-month trade situation released more than a week ago.

Meanwhile, the economy’s total import value in the first seven months of this year is estimated at 215.59 billion USD – a year-on-year climb of 13.6%, in which 76.06 billion USD is for domestic firms – up 13.5%, and 139.53 billion USD is for foreign companies – up 13.7%.

This period also saw 33 import items with import turnover of more than 1 billion USD, accounting for 88.6% of the country’s import turnover, and three items with import turnover of over 10 billion, equivalent to 40.8%.

Under results of the General Statistics Office’s (GSO) second-quarter survey on nearly 5,640 manufacturing and processing businesses nationwide, 76.5% of respondents said that the number of new export orders for the second quarter of this year will “increase” or “remain unchanged” compared to that in the first quarter – in which the textile and garment sector saw the highest rate with 43% of businesses having higher orders in the second quarter than in the first quarter of 2022.

Meanwhile, 23.5% of the surveyed companies reported a fall in new export orders, with the furniture sector seeing the highest reduction in orders – at 32.1%.

Also, according to the GSO, about 85.5% of respondents hoped that their new export orders will “increase” or “remain unchanged” in the third quarter compared to the second quarter of this year. Only 14.5% of surveyed companies predicted a drop in such orders.

Challenges ahead

Nguyen Viet Thang from Hanoi Garment and Textile Materials said that the company expects to reap double-digit export turnover for the whole of 2022.

“However, we are now worrying about a fall in export orders in Europe, where there is now an energy crisis. A number of partners from Europe and Russia have halted orders with us because their production has been reduced,” Thang said.

Truong Van Cam from the VITAS also underscored the risks ahead for the textile and garment sector.

“New variants of COVID-19 have appeared. What is more, the Russia-Ukraine conflict will also continue having negative impacts on the garment and textile sectors because Vietnam sells a large volume of garments and textiles to Russia and Ukraine,” Cam said, adding that prices of materials have also expanded by an average of 15-20%, affecting local production.”

In its report on Vietnam’s 7-month trade situation released last week, the MoIT stated that the world economy’s recovery is on a downtrend and a short-term recession may occur. Inflation is expected to continue to stay at a high level in a number of economies, accompanied by faster monetary policy adjustment, posing potential risks to the stabilisation of the global financial and monetary markets.

“The conflict in Ukraine can be prolonged, affecting not only fuel prices, transportation and logistics costs, and production and consumption supply chains, but also causing potential risks to regional and global political stability, and a food and energy security crisis,” the report read. “The global economic outlook will continue to be influenced by the direction of the Russia-Ukraine conflict, while the adjustment of financial-monetary policies in many nations will have negative impacts on supply chains and consumption, thereby affecting production and import-export activities.”

Last November, projecting that the global market will see negative fluctuations in demand for goods, the National Assembly set the target that Vietnam’s export-import turnover for this year will be 660.8 billion USD, including 329.9 billion USD worth of exports and 330.9 billion USD in imports. This would mean a trade deficit of 1 billion USD.

The World Bank has forecast that Vietnam’s economy will grow by 7.5% this year, but said that this positive outlook is subject to heightened risks that threaten recovery prospects. “Risks include growth slowdown or stagflation in main export markets, further commodity price shocks, continued disruption of global supply chains, or the emergence of new COVID-19 variants. Domestic challenges include continued labour shortages, risk of higher inflation, and heightened financial sector risks,” the World Bank said in a press release issued on August 8, 2022.

VNA