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Clearing disadvantages for export

Trường Lăng
Trường Lăng, founder and 15-year director of Viettonkin, guides the company's strategic direction, makes top-level decisions, and represents the firm in key business negotiations. With over 20 years of consulting experience in Belgium and Southeast Asia, including 15 years specializing in FDI projects, he has established himself as a top expert who helps clients across industries expand their businesses. His deep knowledge of risk management and business operations, combined with his proven track record of successful consultation projects, makes him a valuable partner for investors seeking quality consulting services.

Export is still recovering strongly, but factors detrimental to Vietnam's goods trade began to appear.

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With a large dependence on imported materials, if the supply chain disruption is prolonged, it may negatively affect Vietnam's exports.

Export decelerates, trade deficit appears

“Export is still recovering strongly.” That is the statement included in the updated report on the socio-economic situation reported by the Government in the Third Session, the 15th National Assembly.

This is true, because goods trading is the field with the fastest growth and the great contribution to the economy recovery during Covid-19 pandemic. The data reported by the Government in the National Assembly shows that the first four months of the year, export turnover of goods is estimated at USD 122.36 billion, up 16.4% over the same period last year.

As for the figure just updated by the General Department of Customs, as of May 15, Vietnam's export turnover reached nearly USD 135 billion, up 15.5%, equivalent to USD 18.18 billion compared to the same period of 2021. The growth rate of 15.5% once again shows that export is recovering strongly.

However, it is not too difficult to realize that the growth rate is somewhat decelerated. Moreover, a big surprise takes place, only the next 15 days “goes” on after a trade surplus of USD 2.53 billion in 4 months, and that the balance of trade in goods is reversed. In the first half of May 2022, the economy had a trade deficit of 2.7 billion USD, the trade balance of goods was in deficit of USD 233 million in the middle of May.

The trade deficit is not much and can be offset by export turnover in the second half of May and the coming months, if commodity export continues their strong growth trend. However, the recent information shows that unfavorable factors to Vietnam's export of goods have appeared.

Reported the Government, the Minister of Planning and Investment Nguyen Chi Dung, the global trade recovery is slowing down because of the impact of the Russia - Ukraine war and the outbreak of the pandemic in China and this may affect Vietnam's trade in goods.

In the May 2022 macroeconomic update report, World Bank (WB) experts said that China is the second big export market and Vietnam’s biggest source of imports. Therefore, Vietnam is still implementing the blockade measures due to Covid-19 will affect Vietnam's processing, manufacturing and export industries in the coming months.

In fact, economic experts have mentioned this recently, especially when major global economies, such as the US, Europe, and China – Vietnam’s major trading partners, growth deceleration.

Even many concerned opinions that the US economy would fall into a "double recession". Slowdown economic growth, increased inflation caused American people’s purchasing power drop down significantly. In March 2022, the US’ retail growth was only 0.5%, lower than 0.8% figure of February. Meanwhile, consumption, export and investment in many cities in China are facing the intense pressure from "zero-Covid-19 strategy"”.

Resolving challenges

Addition to forecasting, the deceleration trend of export turnover has somewhat shown that difficulties in Vietnam's goods trade have begun to reveal. This problem is clearly shown in the recent statistics of Vietnam's export turnover.

In April 2022, export turnover reached only USD 33.32 billion, down 4%, respectively, down USD 1.39 billion compared to the previous month. In the first period of May, export turnover reached USD 12.82 billion, down 28.6% (corresponding to USD 5.13 billion decrease in absolute figure) compared to the 2nd period of April 2022.

The commodity group of electronics, phones and components are mostly declined and this can be explained by the seasonal factor. The first months of the year, especially March is commonly the time when manufacturers like Samsung accelerate production and export new products, thus, the general trend will go down in April.

Data from the General Department of Customs showed that in April 2022, export of electronics, computers and components reached US$4.47 billion, down 15.9% from the previous month; meanwhile phones and components reached USD 5.79 billion, down 11.5% compared to the previous month.

The difficulties in Vietnam's goods trade are, however, true. Although there are many optimistic opinions about Vietnam's export acceleration ability, Can Van Luc, an economic expert still wonders because half of Vietnam’s current export growth rate is derived from price raise, while the most important thing is that an increase in quantity.

Moreover, Mr. Luc also worries that the high prices of raw materials, fuel and input materials for production, increased logistics costs will affect the production and business efficiency, and the corporate profit margin.

From another angle, WB experts recommend that Vietnam is mostly dependent on materials imported from China, if the supply chain disruption is prolonged, it may negatively affect Vietnam export in the coming months. "Vietnam should still diversify its trading partners to mitigate risks and ensure the sustained export growth," recommended the World Bank.

Although the recovery signs are in the field of trade and services, there are many difficulties. Complicated Covid-19 epidemic and escalating global political instability along with a sharp increase in oil prices can threaten the path of global recovery and that of Vietnam's major trading partners such as the US, China, European Union, leading to disruption in the global supply of raw materials, fuels and materials, high freight rates, high prices of raw materials, fuel and materials, which can affect trade and investment in Vietnam in the coming time.

Source : Baodautu

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Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.


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