The textile and garment industry experienced a sluggish start in the first four months of the year, with a 20% decrease in export turnover compared to the same period in 2022, marking the sharpest decline among textile and garment exporting countries.

Few bright spots

The export situation in May and the first five months of the year showed that agriculture continues to be the backbone of the economy. Against the general decline, the export of agricultural, forestry, and aquatic products in May reached a turnover of US$2.9 billion, an increase of 9.5% compared to the previous month and 8.5% compared to the same period last year. Specifically, the export turnover of fruits and vegetables nearly doubled compared to the previous month, reaching an estimated US$500 million; rice increased by 53.1%, reaching US$530 million; and coffee increased by 28.5%, reaching US$418 million.

Dang Phuc Nguyen, Secretary-General of the Vietnam Fruit and Vegetable Association, believed that the significant increase in fruit and vegetable exports was thanks to Vietnam's successful signing of protocols for official exports of durian, sweet potato, and banana to the Chinese market; grapefruit to the US, and lime to New Zealand. Particularly, the export of durians has made a significant contribution to the impressive export results of the fruit and vegetable sector. According to Nguyen, if the advantages are fully utilized, and the limit ations are addressed, the future of the fruit and vegetable sector will undoubtedly thrive. The export target of US$4 billion for 2023 is highly optimistic.

In the overall export landscape, the Ministry of Industry and Trade (MoIT) evaluated that in the first five months of 2023, export activities have continued to be affected by production difficulties and a decline in export orders, resulting in an estimated export turnover of US$136.17 billion, a decrease of 11.6% compared to the same period last year. However, there are optimistic signs indicating a certain recovery in export activities. In May, the export turnover reached US$29.05 billion, an increase of 4.3% compared to the previous month. Although the export turnover in May decreased by 5.9% compared to the same period last year, the rate of decline slowed down compared to the previous month.

All sectors face difficulties in the export market due to the global decline in total demand, especially for non-essential consumer goods. Consequently, the export turnover in most major markets in the first five months of 2023 has decreased. However, the impact on export varies across different sectors. Sectors such as textiles and garments, leather and footwear, wood, and aquatic products, with major export markets being the US and the EU, have experienced the most significant decline. Meanwhile, sectors such as rubber, rice, fruits and vegetables, and cashew nuts, with major export markets in Asia, have been less affected.

According to the Vietnam Textile and Garment Group, considering the context of 2023 with slower global growth compared to 2022 and declining purchasing power in major markets such as the US and Europe, ongoing unfavourable factors in the market, the Vietnamese textile and garment industry has experienced a subdued period in the first four months of the year with a 20% decrease in export turnover compared to the same period in 2022, the deepest decline among textile and garment-exporting countries. Key export markets for the industry, such as the US and China, have decreased by more than 30%, and the EU has decreased by 12%.

Opportunities for a turnaround?

Although there are still many challenges ahead for key export products that require special attention from businesses and industries to access the market shortly, forecasts indicate a gradual recovery in export activities in the last six months of the year.

According to Tran Thanh Hai, Deputy Director-General of the Import-Export Department (MoIT), inflation has decreased in some markets, suggesting opportunities to recover consumer goods exports in the coming months. With proactive and preparedness measures from businesses, export orders will soon be fulfilled.

Hai analyzed that the current decline is mainly market-related, while domestic production capacity remains strong and unaffected by factors such as diseases or disruptions in the supply of raw materials. This advantage enables businesses to be ready to resume production and export when the market improves.

The MoIT believed that the global economy would continue to face difficulties in the foreseeable future, with signs of slow and uneven recovery in different countries, resulting in slow consumer demand recovery. However, the forecast indicated a better recovery in import and export activities in the second half of this year due to reduced stockpiles of goods in major markets, particularly in the US, and importers showing signs of placing orders again. In the US, Vietnam's largest importing market, major retailers have nearly cleared their excess inventory and are preparing to replenish shelves with new goods. This opens up expectations for Vietnam's goods exports to improve in the second half of this year after several consecutive months of decline.

However, businesses will face significant challenges in the year's second half as developed countries increasingly focus on consumer safety and establish new technical standards and barriers for imported products. China's reopening adds to the competition in Vietnam's export markets. These factors will continuously affect Vietnam's production, import, and export in the coming months. Nevertheless, with their tariff advantages, the free trade agreements (FTAs) continue to enhance the competitiveness of Vietnamese goods, providing certain advantages for manufacturing and export businesses. Notably, the industrial production index has been gradually increasing over the months, and imports of raw materials show signs of growth. These factors forecast a more optimistic outlook for production and import-export activities in the coming period.

From a business perspective, Pham Xuan Hong, Chairman of the Board of Saigon 3 Garment JSC, Chairperson of the HCM City Association of Textiles, Garments, Embroidery, and Knitting, stated that when the main market declined, businesses shifted their focus to other markets such as Australia, the Middle East, Arab countries, and New Zealand. While these markets are not as large, they bring hope to compensate for the shortfall in orders from major markets.

According to representatives of Vietnam Trade Offices abroad, export markets' requirements are increasingly stringent, especially in terms of food safety, environmental friendliness, and emission standards. Le Quoc Phuong, former Deputy Director of the Center for Trade and Industry Information, believed businesses need to utilize the FTAs to boost import-export activities effectively. However, the FTAs are only a necessary condition, and the key issue is to make efforts to improve the quality and cost-effectiveness of Vietnamese goods, enhance the ability to quickly fulfil orders, and provide better after-sales services.