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Vietnam’s textile and garment industry: Scenarios for 2023

Vietnam’s textile and garment industry: Scenarios for 2023

Tuesday 27, 12 2022
Vietnam's textile and garment industry has been in trouble for the last couple of quarters. In a positive scenario, the industry expects to recover in the second half of 2023.

Vietnam’s textile and garment in 2022

Vietnam’s textile and garment industry underwent two opposite growth phases in 2022.

In the first half of 2022, the industry enjoyed its fastest growth rate over the past 15 years, with a rate of 35-40%. That rate stem from the rising demand post-pandemic. With rocketed demand, the orders for textile and garment products also drastically increased in the first quarter of 2022.

Vietnamcredit Vietnam textile and garment

Entering the third and fourth quarters of 2022, orders for Vietnam’s textile and garment products quickly plummeted. Several enterprises suffered a decrease of 70-80% in orders.

Mr. Vuong Duc Anh of the Vietnam National Textile and Garment Group (Vinatex), stated that among the 5 main export markets of Vietnam's textile and garment industry, the US and the EU experienced a very rapid reversal in exports.

In the first 6 months of 2022, textile and garment imports are still growing in this market by up to 40% over the same period last year. However, from the fourth quarter of 2022, the situation played out like the worst-case scenario forecasted by Vinatex.

In October and November 2022, exports of textiles and garments to the US decreased by 10-14%, while in the first 8 months of the year, they still increased by 20%. That is also in contrast to prior years when the fourth quarter usually has the best export results.

As of the 9 months of 2022, Vinatex's profit reached 1,186 billion VND, 24% higher than the assigned plan. Starting from August, the market showed negative signs. From September, the textile and garment market followed a downward trend.

In the first months of the fourth quarter, Vietnam's textile and garment businesses fell into a difficult situation when the yarn market was almost non-liquid, and the garment market's orders dropped sharply. Information about losses from member companies was continuously reported, especially from fiber manufacturing ones. That partly caused the operating results of some members of the group to slow down.

Vinatex's business results in 2022 are estimated to reach a consolidated revenue of 19,535 billion VND, up 15% over the same period, reaching 108% of the annual plan. Consolidated profit is estimated at 1,090 billion VND, exceeding 14.6% of the plan. Mr. Duc Anh assessed that these business results were positive ones, in the context that orders and laborers were getting scarce on the market.

Vietnamcredit Vinatex's

The situation in other textile exporting countries is not brighter. In October, China's textile and garment exports decreased by 13%, losing about 3 billion USD, India decreased by 35%, Cambodia by 17%, etc. Bangladesh was the only country that maintained export momentum.

Two scenarios for 2023

According to the Vietnam Textile and Apparel Association (Vitas), 2022 is a challenging year for the industry when it has to face the pressure coming from the downward global economy and high inflation in many major economies, causing a decline in demand for textiles and garments.

The second half of the year was riddled with difficulties. Inflation and war in Ukraine affected global purchasing power, causing orders of businesses to decrease.

However, according to Vitas’ data, the textile and garment industry still reached the target of 43-44 billion USD, an increase of nearly 9% compared to 2021.

In 2023, Vietnam's textile and garment industry expects two export growth scenarios.

In the positive scenario, the industry can reach a turnover of 47-48 billion USD with the expectation that the market will recover in the second half of 2023.

In the less positive scenario, textile and garment export growth is expected to be around 45-46 billion USD.

Vietnamcredit forecasted

It is forecasted that the difficulties of export industries, including textiles and garments, will last until the end of the first quarter, even the second quarter of 2023. The situation where orders decrease, unit prices are low, and enterprises face increasing pressure on green and sustainable development requirements from import partners will be common.

Mr. Le Tien Truong - Chairman of the Board of Directors of Vinatex, said that the current period is not only difficult for Vietnam's textile and garment industry but also for the global market when the total demand for the textile and garment industry suddenly fell due to the economic downturn.

Mr. Truong also said that Vietnam's competitive position and advances in the past few years have been caught up with or even surpassed in the past two or three years. Therefore, Vietnam must have breakthrough innovations to maintain its position in the top 3 in the world.

Mr. Truong also forecast that in 2023, Vietnam's textile and garment industry will be worse than in 2022. The textile and garment industry has a short production cycle, and demand is very sensitive to income and employment in the world, so in the current uncertain economic conditions, it is impossible to have a long-term forecast for the whole year.


Compiled by VietnamCredit


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