Growth of the mining industry decreased by 0.92% in the fourth quarter of 2019. Crude oil and natural gas exploitation in the fourth quarter decreased by 3.6%, which was the main reason for the decline in the mining industry. Oil production in key fields in 2019 experienced a continuous decline as the newly discovered fields were small, near the border and operating conditions were complicated and costly. Coal mining only increased by 8.2% in the fourth quarter, much lower than the third quarter (20.5%). The slowdown in coal mining is explained by seasonality as the hot weather was over and hydropower production increased.
The positive side of the mining industry is metal ore mining. This sector saw a strong growth in the fourth quarter (up 47.2%). However, because the proportion of metal ore mining is quite small, the above increase is not enough to compensate for the loss of oil and gas.
The growth rate of manufacturing and processing industry decreased to 10.86% in the fourth quarter, which is the lowest level for many quarters. The decline in manufacturing is obviously seen in almost all sectors. Specifically, production of coke and refined oil decreased by 16%. Fifty-day maintenance of the Nghi Son Refinery in the fourth quarter sharply reduced the industry growth. By 2020, industry growth will also be low because it is difficult to increase the capacity of Dung Quat and Nghi Son plants.
Meanwhile, metal production increased by only 9.3%, less than 1/3 of the average increase in the first 3 quarters. The high growth of the metal industry over the past few years mainly comes from the Formosa project. The market for domestic consumption and export is facing difficulties, and Formosa's output declines, leading to the slowing growth of the whole industry. According to statistics of the Steel Association, total steel sales in 11 months was 21.2 million tons, up only 6.3%, (that of the first 9 months increased by 8.5%) of which steel exports were 4.2. million tons, down 2.6%.
Production of electronic was also unpleasant when its growth rate only increased by 5.1% (in December, the rate was 3.3%), the lowest level in 33 months. Electronic manufacturing industry will not be satisfactory when the export market of phones is saturated. Imports of phones and components continued to decline, with a 14% decrease in December, which is a negative sign for the production of phones and electronics in the first period of 2020.
Production of motor vehicles increased by 2.8%. Particularly, in December it went up by 11.9% after 4 months with almost no growth. The encroachment of imported cars and weak demand have caused the domestic automobile industry to slow down. According to VAMA sales report, domestic assembled car consumption in November dropped by 12.4% and overall in 11 months, it dropped by 12.8% while that of import car increased by 15% and 104% respectively.
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Garment is decelerating alarmingly. In the fourth quarter 2019, this sector only increased by 3.7%. The trade war has had a negative (instead of positive as expected) impact on the textile industry from two aspects. Firstly, global textile and apparel aggregate demand increased slowly - only 3.3% instead of 7.4% as in 2018. Secondly, short-term business plan and defensive strategy against unpredictable changes in international trade policy have caused difficulties in optimizing plans and costs for textile enterprises
According to SSI, slowing growth of industries with large proportion (electronics products, motor vehicles, textiles) and industries with very high growth rate (refined petroleum, metal) has affected the whole manufacturing and processing industry. The positive thing is that most other industries such as: textile, leather production, wood processing, paper, rubber products and plastics still experience stable growth.
The low growth in the fourth quarter of the manufacturing industry shows the heavy dependence on a few large FDI enterprises such as Samsung (phones), Formosa (steel), Nghi Son petrochemical refinery (refined oil), which brings a lot of risks for growth.
The decline in production and business activities of these FDI enterprises is mainly due to objective reason which is the consumption market, but the subjective reason of changing investment strategy could not be ignored. Therefore, Vietnam's economic planning and forecasting has also become complicated.
With phones and petrochemical refining, policy interventions will be ineffective. However, these industries can be supported in many ways. In addition to Formosa project, in 2020, Hoa Phat Dung Quat steel project will come into operation, so it is necessary to take protective measures against Chinese steel or promote trade with ASEAN countries (the main market of Vietnam's export steel). Disbursement of accelerated public investment will also increase demand for steel and other construction materials.
GDP of electricity and gas production and distribution in the fourth quarter had a low growth rate of only 7.6%. Electricity production increased but the growth rate has slowed down, in December it increased only 3.9%, the lowest in 15 months (it increased by 11.5% in 2018). In addition to weather and seasonality, demand has also affected the industry's production. Commercial electricity in 2019 reached 209 billion kWh, up by 8.87% while in 2018 it increased by 10.47%.
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