The Ministry of Industry and Trade (MoIT) has just issued a warning that Vietnam’s export landscape may be hurt by a grey global economic situation featured by a plummet in demand.
The MoIT said that the danger of economic depression, high inflation, and high-interest rates “will lead to a slash in demand for consumption in many nations worldwide including those in Europe and America, which are the major trade partners of Vietnam.”
According to the MoIT, the trend of non-globalisation is surging. Trade protectionism in many nations is increasing. Developed nations are paying more attention to safety for their consumers and sustainable development and the fight against climate change. Therefrom they have and will continue applying new regulations and standards regarding supply chains, materials, labour, and environment for imported products. For example, the EU has applied an anti-deforestation bill and a carbon border adjustment mechanism (CBAM), while the US has and will continue increasing and sticking standards about labour, environment, and intellectual property to trade.
In fact, in the first six months of 2023, the EU has also applied a new regulation on environmental protection with a focus laid on reducing emissions from products in the sectors of textile and garment, footwear, and electronics.
In January 2023, the European Commission released Commission Implementing Regulation (EU) 2023/174 amending Implementing Regulation (EU) 2019/1793 on the temporary increase of official controls and emergency measures governing the entry into the EU of certain goods from certain third countries. Under this new regulation, some Vietnamese products have been affected, including chilli and okra, which a quality examination frequency rate of 50%.
In the agricultural sector, the US has adjusted the allowed residue level of pesticides on agricultural and aquacultural products like bananas, mung beans, coffee, and packed or unpacked tea. Canada also has a similar plan for raw and processed produce. Additionally, the EU is adding regulations on infectious disease prevention, control, and elimination of processed food.
Other markets such as Taiwan, Turkey, Russia, and China are also adjusting their quarantine management measures for imported animals and plants, and their monitoring procedures for sanitary and epidemic factors at the customs offices along borders. They have boosted the tracking of the origin of imported goods and labelled them accordingly before distribution. They have also introduced new limits for contaminants in food, supplements, and additives.
According to the Ministry of Agriculture and Rural Development, Vietnam’s export of agro-forestry-aquatic products hit a record revenue of over 53.22 billion USD last year, up 9.3%, including nearly 11 billion USD from aquatic products. The total export turnover of these products stood at 2.97 billion USD in June, bringing the six-month figure to 17.1 billion USD, up 13.1% year-on-year,
Vietnam will also continue facing some risks from now until the year’s end, due to the world economy forecasted to see slower-than-expected growth – leading to a slow-paced recovery in consumption demands, the MoIT said.
For example, the World Bank last month expects the growth will be about 2.1% in 2023, up by 0.4% from the bank’s projection early this year. The Organisation for Economic Co-operation and Development has also made a global economic growth rate of 2.7% for 2023, up 0.1% from its March projection. Meanwhile, the International Monetary Fund has lowered its global growth to 2.8% for 2023, from its 2.9% forecast made in January.
The Vietnamese National Assembly Economic Committee reported at the National Assembly (NA) that this grey economic situation in the wider world will continue badly affecting the Vietnamese economy, especially its exports and imports. It is because the Vietnamese economy is quite open to the global economy, with export and import values being early twice the size of GDP.
“This will have negative impacts on Vietnam’s exports which have reduced significantly in the first six months of this year,” the MoIT said.
In June, total export turnover is estimated to be 29.3 billion USD, down 11.4% year-on-year – in which domestic exporters reduced by 8.1% and foreign-invested exporters declined by 12.6% (including crude oil exports).
In the first half of this year, Vietnam’s export value sat at about 164.45 billion USD, down 12.1% year-on-year – with domestic enterprises’ coming at 43.41 billion USD, down 11.9% and accounting for 26.4% of the economy’s total export turnover; and foreign-invested enterprises (including crude oil exports) hitting at 121.04 billion USD, down 12.12% and occupying 73.6% of the total.
Many key export markets of Vietnam have also seen a year-on-year reduction in turnover in the first six months of this year, including China (25.6 billion USD – down 2.2%), the US (44.2 billion USD – down 22.6%), the EU (21.6 billion USD – down 10.1%), ASEAN (16.3 billion USD – down 8.7%), the Republic of Korea (10.9 billion USD – down 10.2%), and Japan (11 billion USD – down 3.3%).
Accumulatively in the first six months of 2023, the Vietnamese economy’s total import and export turnover of goods is estimated to reach 316.65 billion USD, a year-on-year reduction of 15.2%.
The garment and textile reaped an export turnover of 15.75 billion USD in the first half of this year, down 15.3% year-on-year. Several other key export industries also followed suit, including mobile phones and their spare parts (24.29 billion USD – down 17.9%), electronics products and their spare parts (25.2 billion USD – down 9.3%), and footwear (10 billion USD, down 15.2%), the MoIT reported.
The MoIT noted, “Whether Vietnam can expand its exports would depend on the country’s ability in diversifying export markets and taking advantage of opportunities from free trade agreements, and settle risks from trade and technological competition among big countries.”
Earlier this year, Minister of Industry and Trade Nguyen Hong Dien said, that the implementation of free trade agreements (FTAs) will continue to prove fruitful for Vietnam in 2023. He noted that the nation has signed and implemented 15 FTAs, becoming an important link in global supply chains.
“A special highlight in 2022 was that amid the complex COVID-19 pandemic, the participation in FTAs, especially new-generation ones like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the EU - Vietnam FTA, and the UK - Vietnam FTA, has helped Vietnam secure impressive export growth and partly mitigate the pandemic’s adverse impacts on its economy,” Dien said.
Vietnam’s total export turnover last year reached 371.9 billion USD, a year-on-year rise of 10.6%.
However, the Ministry of Finance has also warned that the unfavourable conditions of exports and imports in the first half of this year have led to a dent in revenues from export-import activities, which are estimated to be as much as 5.26 billion USD, down 20.6% year-on-year.
Based on forecasts that there will be massive difficulties both at home and abroad, the state budget overspending in 2023 will likely be 19.8 billion USD, which will be tantamount to 4.42% of GDP.
The budget revenues this year are expected to be 70.46 billion USD, which is far lower than the realised figures of 77.6 billion USD last year.
Meanwhile, it is estimated that Vietnam’s total state budget expenditure this year will be about 90.26 billion USD – up 16.3% year-on-year.
