Vietnam remains sanguine about prospects for trade in second half

Economists remains optimistic about prospects for trade in the second half of the year despite decline in export growth in the first half.

Vietnam’s overall trading picture during the first half of the year saw a decline in export growth while import growth was maintained at a high level. This resulted in changes of the trade balance from a trade surplus to a trade deficit.

However, many experts predict that the trade picture could look different if favourable factors are in place to support export growth in the second half of the year.

According to statistics released by the General Statistics Office (GSO), the country’s total import-export turnover during the five-month period increased by 8.5 per cent to US$202 billion in comparison to the same period last year. Of which, the total export value reached US$100.7 billion, up 6.7 per cent, while import turnover hit US$101.3 billion, a rise of 10.3 per cent.

These figures show that the trade balance saw a deficit of nearly US$600 million in comparison with a surplus of US$3.1 billion against the same period last year.

Export growth at lowest levels for three years

During the first five months of the year, experts from Rong Viet Securities Corporation (VDSC) noted some important changes taking place in the structure of import-export commodities groups.

Most notably, exports witnessed their lowest level of growth over the past three years. In particular, export turnover of farm produce and minerals plummeted in comparison with the same period last year. The export growth of industrial products, a key industry within the national economy, also weakened with only 8.6 per cent.

The export growth of telephones and components, which account for 20 per cent of total export turnover, saw a sharp decline while only a few sectors experienced positive growth such as garments and textiles, wood and computers, and electronics components.

The import growth rate of commodity groups that need control stands at a high level (achieving nearly 25 per cent compared with last year’s corresponding period). Some of the key imports that enjoyed high growth were automobiles, fruit and vegetables, cameras, and movie cameras.

It is a paradox that while domestic firms look to try to boost the import of automobiles after working to meet the standards of Decree 116, there has been a sharp rise in the import of fruit and vegetables over the reviewed period.

Thailand and China have emerged as the two major markets which supply fruit and vegetables to the country while the nation’s own fruit and vegetables have faced a number of difficulties in seeking outlets.

Among the commodity group that needs imports, the demand for the import of essential commodities such as crude oil and coal skyrocketted to supply to oil refinery and coal-fired thermal power projects.

According to data and classification of imports by the International Trade Centre, the nation spent nearly US$800 million purchasing machines from China in order to serve solar power plant projects during the first three months of the year.

In addition, domestic businesses also imported more computers, electronic components, and a variety of machines during the first four months of the year.

'A dramatic shift' in trade balance in second half

Although the trade balance witnessed a change from a surplus to deficit in the first half of the year, experts remain optimistic about the trade balance over the course of the second half of the year and hope to see a clear shift by the end of the third quarter of the year.

Experts from VDSC believe that the country’s exports will increase while the demand for imports will decline over the second half of the year due to the harvest season and state management.

Economists from VDSC emphasized that exports of farm produce and electronics, which make up nearly 40 per cent of total export turnover, are likely to rebound in the remaining months of the year.

Regarding the question on how Vietnam can benefit from the escalating US-China trade war,

Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV), said that several of the nation’s sectors will benefit from the ongoing tensions, most notably industries such as garments and textiles, footwear, seafood, farm produce, wood and electronic products, and telephone and components.

The BIDV chief economist noted that local businesses need to be proactive in utilising their new advantages and must seize the opportunities to gain a greater market shares whilst focusing on making renovations to improve their competitive edge to increase export capacity to the US.

Vietnam is one of the most open economies to international trade in the region, with total import-export turnover last year reaching US$482.2 billion, equivalent to 200 per cent of GDP, Luc said.

The escalating tensions in the US-China trade war will therefore make a negative impact on the global economic growth and trade, leading to an overall decrease in demand, which will in turn have an adverse effect on the nation’s import-export activities.

In the 2019 to 2020 period, the country’s trade is predicted to be significantly affected due to a decline in global demand. However, in the context of trade tensions, the nation will see a wealth of opportunities in several sectors, including garments and textiles, footwear, seafood, farm produce, wood and electronic products, and telephones and their components.

In addition to taking advantage of signed Free Trade Agreements, these moves will serve to reduce the negative impacts of the US-China trade war, he noted.