A go-slow-down in global demands is predicted to linger, making it difficult for Vietnam to expand exports this year, while also affecting the country’s state budget revenues.

Fresh figures from the Ministry of Industry and Trade (MoIT) showed that Vietnam’s export turnover has gradually bounced back since early this year, “thanks to strong trade promotion activities”.

The value is estimated to come in at 29.05 billion USD in May, higher than the 27.86 billion USD recorded in April, but still lower than the 29.71 billion USD in March. The figure touched 25.88 billion USD in February, after sitting at 23.61 billion USD in January.

In May, the export turnover of Vietnamese enterprises sat at 7.79 billion USD – up 1% on-month while that of foreign-invested enterprises (FIEs), including crude oil exports, came at 21.26 billion USD – up 5.5% on-month.

However, as compared to the corresponding period last year, Vietnam’s total export turnover in May went down by 5.9%. In which Vietnamese enterprises reduced by 5.9% and FIEs’ including crude oil decreased by 5.8%.

Accumulatively in the first five months of 2023, export activities continued to be affected by production difficulties and a decrease in export orders, so Vietnam’s total export turnover is estimated at 136.17 billion USD, down 11.6% compared to the same period last year.

Of which, the Vietnamese exporters earned 35.19 billion USD, down 13.2% and accounting for 25.8% of total export turnover, while foreign exporters (including crude oil exports) reached 100.98 billion USD, down 11.1%, accounting for 74.2%.

In addition to the decrease in export orders, a fall in export prices was also one of the factors that reduced the country’s export turnover in the first five months of this year. In which, the average export price of many commodities decreased as compared to the corresponding period last year, such as tea (down 7.9%), cashew nuts (1.5%), pepper (34.3%), rubber (21.1%), fertiliser (35.2%), and plastic raw material (24.4%). Only a few items enjoyed an increase in export price, including rice (up 7.9%), coffee (3.5%), and coal (38.5%).

Also, in the first five months of this year, there were 23 items with export turnover of over 1 billion USD - which was three items higher than in the first four months of the year - accounting for 87.4% of total export turnover (with seven export items valued at over 5 billion USD, accounting for 65.4%).

Mobile phones and their spare parts, about 90% from Samsung, are reported to reach a five-month export turnover of 21.178 billion USD, down 16% year-on-year.

Meanwhile, electronics, computers, and their spare parts – which are largely produced by many FIEs such as Samsung, LG, Jing Gong, Daewoo Vietnam, Genesistek Vina, and FC Vietnam, have hit a total five-month export turnover of 20.33 billion USD – down 9.8% as compared to that in the same period last year.

From an initial investment of 670 million USD in the northern province of Bac Ninh, Samsung has invested 20 billion USD in Vietnam. That said, the figure will continue to grow. During a visit to Vietnam in 2022, Roh Tae-Moon, president and head of Samsung Electronics’ Mobile Experience (MX) Division, said that Samsung would invest an additional 3.3 billion USD in Vietnam.

Between 2018 and 2022, Samsung contributed over 306 billion USD in export turnover to Vietnam. In particular, in 2022 alone, the achieved figure is still up to 65 billion USD, making an important contribution to bringing Vietnam’s total export turnover to surpass 700 billion USD for the first time, reaching more than 732 billion USD.

Causes

The MoIT has elaborated on the reasons behind the decline in industrial production and import-export activities.

Specifically, major economies that are Vietnam’s export partners such as the United States and the EU have been reducing expenditures on conventional and luxury products, causing the volume of orders to decrease, while the industrial manufacturing sectors in Vietnam are mainly export-oriented, heavily dependent on the global market.

It is because the domestic production output far exceeds the demand of the domestic market, especially for industries such as textiles and garments, leather and footwear, and electronics. Only 10% of these products are for domestic consumption, while the remaining 90% of output is for export.

In addition to the decrease in volume, over the same period last year, the export prices of many agricultural products such as cashew, coffee, pepper, and rubber have decreased. Moreover, export prices of crude oil, petroleum products, ores, fertilisers, and iron and steel have also fallen, affecting the growth of production and commodity exports in general, the MoIT said.

For example, the United States remained Vietnam’s largest export market in the first five months of 2023, accounting for 26% of the Southeast Asian country’s total export turnover.

The fact that the Fed maintained interest rate increases for a long time has achieved certain results in dealing with high inflation. However, consumer spending in this nation has shown signs of slowing down and is expected to continue to weaken, in the context of business bankruptcies, job cuts, and warnings about the recent economic recession. In the US, the savings rate has increased, meaning people are becoming more cautious in consumption.

“All of these have affected Vietnam’s exports to this market. Therefore, the import demand of this market for Vietnam’s goods continued to decline sharply over the same period, estimated at 37 billion USD, down 19.5% in the first 4 months, it decreased by 21% on-year,” said MoIT Deputy Minister Phan Thi Thang.

Meanwhile, China is Vietnam’s second-largest export market. Though China has opened its border since January, its economy has yet to recover quickly because of difficulties in the context of an export decrease, due to a decline in global demand.

Besides that, the real estate sector, which is a key pillar of China’s economy, is still bogged down with difficulties, in addition to unemployment directly affecting the consumer demand for goods of Chinese people, together with the increasing requirements for goods standards.

“These factors are the main reasons leading to difficulties for Vietnam’s exports to this market. Therefore, Vietnam’s export turnover to China in the first five months of 2023, is estimated at 19.8 billion USD, down 9.3% over the same period last year,” Thang said.

In another case, the decline in exports to the EU has shown signs of slowing down, in many major economies of the eurozone, the consumer price index in May decreased. For example, Germany's inflation rate in May 2023 only increased 6.1% year-on-year, while that of France decreased to 5.1% from the previous month’s increase of 5.9%, Spain’s decreased to 3.2% and Italy’s dropped to 7.6%.

Therefore, Vietnam’s exports to the EU market in the first five months were estimated at 18.4 billion USD, down 6.5% year-on-year.

Exports to some other markets also continued to decrease such as ASEAN (13.9 billion USD, down 5.1%); the Republic of Korea (9.5 billion USD, down 7.1%); Japan (9.4 billion USD, up merely 0.4%).

Vietnam’s key export markets include the US, China, and the eurozone, and the Economist Intelligence Unit Limited has forecasted that their growth rates this year may stand at 0.7, 5.7, and 0.7%, respectively.

Last year, Vietnam’s export turnover from these markets reached 109.1 billion USD, 58.4 billion USD, and 47.1 billion USD – up 13.3, 4.5, and 17.4%, respectively.

Affecting state budget revenues

The Ministry of Finance (MoF) revealed that the unfavourable conditions of exports and imports in the first five months of this year have led to a dent in revenues from export-import activities, which are estimated to be 4.58 billion USD – down 20% year-on-year.

Based on forecasts that there will be massive difficulties both at home and abroad, the state budget overspending in 2023 will likely be 19.8 billion USD, which will be tantamount to 4.42% of GDP.

The budget revenues this year are expected to be 70.46 billion USD, which is far lower than last year's realised figures of 77.6 billion USD, which was equal to 126.4% of 2022’s estimates and up 13.8% year-on-year.

Meanwhile, it is estimated that Vietnam’s total state budget expenditure this year will be about 90.26 billion USD – up 16.3% as compared to the expenditure estimations of 2022.

The National Assembly Financial and Budgetary Committee suggested that the government “increase revenues from land use and equitisation of state-owned enterprises; and revenues from taxes and fees”, and “apply sturdy solutions to prevent revenue losses and tax evasion to ensure budget balance”.

Fresh figures from the MoF showed that in the first five months of 2023, the economy recorded a state budget surplus of 5.06 billion USD.

In the meantime, total revenues are estimated to reach over 28 billion USD, equal to 47.5% of the year’s estimates and representing a year-on-year decrease of 6%.

Domestic revenues are estimated to come at 27.77 billion USD, down 2.9% as compared to the corresponding period last year. In addition, revenues from crude oil exports touched over 1.1 billion USD, a reduction of 12.1% year-on-year.

Source: Bao Nhan Dan