Vietnam’s foreign trade to face headwinds

Vietnam’s export value in August was lower than the average level of seven first month of 2021 and below its value in the same period last year.

GSO’s estimates show that Vietnam’s trade operations were being negatively affected as the disruption in production under the ongoing outbreak was inevitable. Vietnam’s export value in August was lower than the average level of seven first month of 2021 and below its value in the same period last year. In detail, the total revenue from exporting goods was USD26.20bn, down 5.42% YoY. Goods import seems to face slighter pressures than export when its value this month was USD27.50bn, higher than the 2021-average level. However, the speed of recovery in import from the 2020 low base also slows significantly as the growth rate this month was just 21.06% YoY, much lower than three recent months.

Besides, except for mild economic effects in the U.S. and Europe due to the high vaccination, our major trading partners in Asia, such as China, South Korea, Japan, and ASEAN countries, suffered economic losses in various degrees from the Delta outbreak, partially resulting in the decrease in their demand for our goods. Furthermore, shipping costs remained high under the congestion in southern seaports, making trade activities slower than usual. For 8M21, export and import values grew by 21.20% YoY and 33.76% YoY, posting USD212.55bn and USD216.27bn, respectively. The trade balance recorded a deficit of USD3.74bn this month, marking the 5-month streak of the low export turnover relative to import turnover.

In the export structure, the majority recorded lower year-over-year growth rates than those in the previous month and labor-intensive products, such as textiles, footwear, and wood-related product (W&Wprod), seem to suffer the hardest damage from the disruption of domestic production. Specifically, footwear, W&Wprod, and textile stepped into the deterioration territory as declining by 38.40% YoY, 26.05% YoY, and 8.97% YoY, posting USD0.85bn, USD0.85bn, and USD2.70bn, respectively. Besides, fishery recorded a significant decrease this month as its export value decreased by 26.36% YoY to post USD0.60bn. On the other hand, exporting of flagship products generally experienced a slighter effect than others as the machine, equipment, tools, and instruments (METI) and telephones, mobile phones, and parts (TMPP) reported modest growth rates of 11.61% YoY and 10.33% YoY, posting USD2.90bn and USD4.72bn, respectively. Amid the gloomy picture in export activities, revenue from selling iron and steel products (I&S) to foreign customers remained fruitful as posting a high value of USD1.20bn this month, up 107.26% YoY.

The deterioration in import activity was less severe than export as its flagship products, including CEPP, METI, and TMPP, kept growing this month. Specifically, import values of CEPP, METI, and TMPP were USD6.30bn, USD4.00bn, and USD1.80bn and rose by 4.49% YoY, 25.03% YoY, and 11.38% YoY. In addition, the import value of iron and steel (I&S) remained high with a value of USD0.97bn, up 29.46% YoY.

KIS Vietnam said that although external conditions became less favorable for Vietnam’s export, the deterioration in selling goods to outside clients was hardly attributed to the disrupted production and seaport congestion in the southern area.

After peaking in July with fruitful economic data, consumer attitudes toward buying became less optimistic due to concerns related to the economic slowdown in China. The U.S conference board announced that the consumer confidence index for this country this month was 113.81, declining by 11.3pts compared to the previous month, indicating that U.S buyers became less bright in assessing the current and future business and job market conditions. Moreover, the consumer confidence index in Eurozone, South Korea, and Japan reduced by 1.5pts, 0.7pts, and 0.8pts, respectively compared to the previous month. Worldwide PMI movements this month also reflect fear of slower economic growth from the world manufacturer. Purchasing managers in China and Southeast Asian factories were assessing that the business environment would worsen under the delta strain's domination. Meanwhile, manufacturers in other regions reduce their expectations of economic prospects with lower PMI values than the previous month.

August witnessed the global economic data became less favorable in fear of the economic slowdown of China. Hence, consumers and suppliers in our main trading partners turn into less optimistic. Furthermore, disrupted production and its related potential order-canceling risk add more challenges to the recovery of trade activities. Therefore, Kis Vietnam predicted that trade activities would face more headwinds in the next month.