Vietnam’s exports face plenty of challenges in year ahead

Inflation is still high in many countries, leading to the trend of monetary tightening and interest rates which are expected to continue to increase in the first half of the year.

Vietnam requires a timely response to maintain its export market in the face of fluctuations occurring in the global economy, high inflation hitting many countries, and the increase in trade protectionism from importing countries leading to many difficulties for the nation’s production and exports.

These important contents were discussed at the Trade Promotion Conference with Vietnam’s overseas trading system, which was recently organised by the Ministry of Industry and Trade.

According to figures given by the General Statistics Office (GSO) under the Ministry of Planning and Investment, the first quarter of the year saw Vietnamese export turnover stand at an estimated US$79.17 billion, down 11.9% over the same period from last year.

The Ministry of Industry and Trade reported that during the first quarter of the year, exports of all sectors recorded a downward trend.

During the reviewed period, the world economy continued to face numerous difficulties, with the United States and the EU economies forecast to grow below 1% meaning there is a possibility of a recession.

Inflation is still high in many countries, leading to the trend of monetary tightening and interest rates which are expected to continue to increase in the first half of the year.

In terms of the domestic market, the trade balance is anticipated to see continued improvement, however, exports will face many common challenges from partner markets.

Meanwhile, domestic market demand has not increased strongly, while inflation has tended to increase, thus affecting economic recovery and development.

Faced with this situation, Vietnamese ministries and sectors, as well as the local business community are required to have timely response solutions.

In order to contribute to overcoming weaknesses and regaining the growth momentum of the country’s economy, Minister of Industry and Trade Nguyen Hong Dien said that it is necessary to correctly assess the situation and specify the causes in a bid to find solutions to overcome the current situation. This will ultimately help to regain the momentum of export growth abroad to ensure it is at least as high as in the same period last year.

In terms of the import and export markets in the first quarter, the US made up the nation’s largest export market with an estimated turnover of US$20.6 billion.

The trade balance of goods throughout the reviewed period was estimated to have recorded a trade surplus of US$4.07 billion, while in the same period last year the trade surplus was US$1.9 billion.

Most notably, developed countries are increasingly paying attention to issues of consumer safety, sustainable development, climate change response, and setting up new standards and regulations related to the supply chain, clean raw materials, labour, and the environment for imported products.

Some countries plan to impose additional regulations on imported goods such as carbon charges and recycling content requirements for imported goods.

These therefore represent huge challenges for Vietnamese exports. However, according to Do Ngoc Hung, commercial counselor of Vietnam in the US, the nation is able to meet all requirements.

“The multilateral and bilateral as well as multi-party frameworks that Vietnam and the US participate in still have things in common that can help promote increased two-way trade turnover such as Trade and Investment Framework Agreements (TIFAs). In addition, one of the main pillars that the US appreciates the Vietnamese economy is the country’s commitment to achieve net zero emissions by 2050 at the 26th UN Climate Change Conference (COP26).

This will be a signal that Vietnam is moving towards green products, circular economy with the goal of protecting the environment, combating climate change and creating a competitive advantage for Vietnamese exports in the future,” Hung went on to say.

Tran Thu Quynh, Vietnamese commercial counselor in Canada, stated that amid the relatively gloomy outlook for the world market, Canada is still a bright spot thanks to having positive market prospects.

According to local data, Vietnamese exports to the region still increased by 20% over the same period from last year.

The group of 10 key products from the country to Canada still maintained a high growth rate, except for seafood, which dropped by 26%, and footwear which recorded a growth of 122% over the same period in 2022.

However, Quynh also warned that a number of commodities are at risk of major impacts in the near future, including apparel products.

“Specifically, garments and textiles will face competitors that have just signed an extension to enjoy generalized system of preferences such as  Bangladesh, Sri Lanka, Cambodia, El Salvador, Haiti, and Egypt,” Quynh continued.

Representatives of associations and industries such as seafood, coffee and cocao all noted that exports in March dropped sharply in all markets, including those in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), along with the US, the EU, and China.

The primary reasons for this are the inflation and banking crisis in the US which has tightened credit, causing importers not to have enough funds to import large shipments. Furthermore, partners restructured warehouses, causing a sharp drop in import prices and a lack of orders.

Along with this is a fierce competition playing out in the market, particularly with the strong rise of a number of competitors who have taken a market share of Vietnamese seafood.

Similar to the coffee and cocoa industry, Do Xuan Hien, chief of Office of the Vietnam Coffee and Cacao Association, informed that coffee and cacao exports decreased in both volume and value.

It can be considered very difficult for domestic enterprises to buy goods because farmers and FDI enterprises store their goods and wait for high prices to sell. The domestic purchase price is high while the export price is unstable, even falling sharply, Chien explained.

Faced with that situation, the Ministry of Industry and Trade have seriously implemented the direction of the Government and the Prime Minister to closely follow the international and domestic situation, closely forecast the situation from the end of 2022 and continue to carry out many solutions to remove barriers for local businesses, helping them penetrate new export markets. In addition, the Ministry has launched a broad array of activities and solutions to stimulate domestic consumption and connect product consumption.