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Factors Affecting Vietnam's Export Growth Momentum

Saturday 07, 12 2019
"Export of goods to the US market is forecast to continue to increase due to the shift of orders from China to Vietnam"
Factors Affecting Vietnam's Export Growth Momentum
According to the Ministry of Industry and Trade, the US-China trade tensions continue to have a multidimensional impact on Vietnam's trade activities. In particular, exports of goods to the Chinese market still face many difficulties due to the fact that Chinese economic growth is slowing down and the demand is shrinking.

FDI helps increase investment capital

Regarding the forecast of import and export, the Ministry of Industry and Trade said that normally the import-export turnover in the last months of the year is usually higher compared to the beginning of the year, because this is the time when goods are prepared massively for the largest shopping occasions around the globe, including Christmas, New Year, Lunar New Year in Vietnam and some Asian countries. Therefore, import turnover of consumer goods is forecasted to keep increasing in the coming months.

According to the Ministry of Industry and Trade, export activities in the coming time will have many favorable supporting factors. In particular, Vietnam is in the process of deep integration into international trade with 13 free trade agreements (FTAs) signed and 3 FTAs under negotiation. Vietnam's export goods have better competitiveness than many other suppliers thanks to the gradual removal of tariff barriers.

In particular, that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) officially came into effect in early 2019 and the Vietnam-EU FTA (EVFTA) was signed and expected to take effect in 2020 is attracting new foreign direct investment, helping businesses gain further production capacity.

Another factor supporting Vietnam's exports in the coming time is the increase in the number of newly registered FDI companies as well as the amount of registered capital. FDI not only helps to increase investment capital, budget revenue and create more jobs, but also boosts exports and provides a momentum for economic growth.

"Export of goods to the US market is forecast to continue to increase due to the shift of orders from China to Vietnam" the Ministry of Industry and Trade said.

US-China trade tensions continue to affect Vietnam's trade activities

In addition to the above-mentioned favorable factors, the Ministry of Industry and Trade also said that Vietnam's export growth momentum in the coming time will still face with many detrimental factors. Accordingly, many organizations have forecasted that the world economy in the coming time will continue to slow down. The Organization for Economic Co-operation and Development (OECD) on November 21 lowered its forecast for global economic growth in 2020, and said that there was no sign of a strong global economic recovery in 2021 due to risks from trade tensions.

The OECD forecasts global economic growth will grow by 2.9% in 2020, which is a decrease of 0.1 percentage point from the forecast the organization made in September.

In addition, in October 2019, the International Monetary Fund (IMF) also cut its global growth forecast of 2019 to 3.0%, which is 0.2 percentage points lower than the forecast in July, making it the lowest level since the global financial crisis of 2008-2009. Although global economic growth is forecast to go back to 3.4% in 2020, it is still 0.1 percentage point lower compared to the forecast released in July 2019.

“The US-China trade tensions continue to have a multidimensional impact on Vietnam's trade activities. In particular, exports of goods to the Chinese market still face many difficulties due to the fact that Chinese economic growth is slowing down and the demand is shrinking. In addition, the export of Vietnam's agricultural and aquatic products to the Chinese market also has to deal with many obstacles due to the country's increased inspection and control of imported goods quality" the Ministry of Industry and Trade stated.
 
The US-China trade tensions continue to have a multidimensional impact on Vietnam's trade activities
 
The Ministry of Industry and Trade also added that the PMI index, measuring the health of manufacturing and processing industries in recent months, has not been very satisfactory. In November 2019, Vietnam's PMI increased from 50 to 51, which is only a slight improvement. The number of new orders continued to go up, however, the increase rate had a marked slowdown. Export of phones of all kinds, the item with the largest export turnover of Vietnam, tends to slow down.

“Many key export items still face challenges. In particular, the EU has not removed the yellow card for Vietnamese seafood. The competition in exporting agricultural and aquatic products is getting fierce as more and more countries participate in supplying agricultural products while the demand is limited. Control of quality as well as traceability, processing capacity, preservation of agricultural products and supporting industries are issues of great concern. Meanwhile, prices of agricultural and fishery products are experiencing a downward trend” said the Ministry of Industry and Trade.

According to the National Center for Hydrometeorological Forecasting, the total rainfall from now to the end of 2019 in the South is 10 - 30% lower than the annual average. The flow in the rivers is in short of 20-50%. This will make drought, water shortage and saline intrusion in the dry season of 2019-2020 more serious, while saline intrusion in the Mekong Delta region will come sooner and worse than average. This may negatively affect the agricultural production activities of the region in the near future.

In addition, export to the US has increased rapidly in recent years, which may have implications for increasing control of imports from Vietnam.

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