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.

Global risks leaving export target on edge, illustration photo/ Source: freepik.com

The MoIT was also ordered to direct Vietnam’s 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 $374.23 billion – down 13.9 per cent on-year “due to colossal difficulties in the global market,” according to the MoIT.

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

The MoIT earlier set a target of $775 billion in total goods export-import revenue this year – up by 6 per cent from 2022. This includes $394 billion for exports and $381 billion for imports, with a trade surplus of $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 $409 billion last year when its total goods export-import turnover was 1.79 times higher, hitting $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 per cent are consumed at home, and the remaining 90 per cent are for export.”

In an example, mobile phones and spare parts, with about 90 per cent from South Korea’s Samsung, are reported to have reached a seven-month export turnover of $27.8 billion, down 18.3 per cent 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 $30.79 billion – down 3 per cent on-year. However their exports in July rose by 32 per cent 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 $4.95 billion, down 25.4 per cent 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, South Korea, 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 (see box), 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 euro area 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.”