Vietnam’s trade surplus expected to reach US$8.9bn in 2022

Vietnam exports of textiles rose by 8.7% mom and 49.9% yoy.

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According to Vietnam Customs, export value climbed to US$ 34.9 billion in August 2022, up 14.1% over that in the previous month and up 27.8% over that in the same period last year. For 8 first months of 2022, Vietnam’s export value increased 18.2% yoy to about US$252.6bn.

In August, the strong improvement in exports was mainly due to (1) more and more production orders moved to Vietnam in the context of China's pursuit of Zero-COVID policy and the drought and power shortage in the Southern China provinces, (2) Exports of key items recovered in August, including phones and their parts, computers and textiles.

To be specific, the export value of phones and components was estimated at US$6.1bn in August, up 39.4% mom and up 9.7% yoy thanks to the launch of new products such as Galaxy Z Flip 4 and Galaxy Z Fold 4. Computer exports also rebound in August with an increase of 25.4% mom (16.5% yoy) after seeing a drop of nearly 23.7% mom (8.3% yoy) in July.

In addition, exports of textiles (8.7% mom, 49.9% yoy) and footwear (0.9% mom, 173.8% yoy) maintained their growth momentum in August although inflation remained high in major export markets such as the US and EU, dampening demand.

Despite witnessing an upswing in August, Mr. Dinh Xuan Hinh, analyst at VNDirect, still maintains a relatively cautious view on the export outlook in the rest of 2022. “We are concerned that tighter global financial conditions and supply chain disruptions could dampen growth prospects for the global economy, thereby weighing on Vietnam's export outlook in the remainders of 2022”, said Mr. Dinh Xuan Hinh.

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The sluggish of global economic growth has been reflected in economic data of the US economy when the US GDP shrank in 2Q22 by 0.9%, a second quarter in a row. The housing market buckled under rising interest rates and high inflation took steam out of business and consumer spending. Vietnam's other major trading partners such as Europe and China also face dismal economic growth forecasts in 2022. Therefore, most research institutions have lowered their global economic growth forecasts by 0.5-0.9% points for 2022F to account for the economic consequences of the Russia- Ukraine crisis and tighter global financial conditions.

“We maintain our view that Vietnam's export growth could slow down in the fourth quarter of 2022, however, we slightly raised our forecast for Vietnam’s export growth in 2022F to 15% (from a previous forecast of 14%) to reflect strongerthan-expected export growth in July-August period”, said Mr. Dinh Xuan Hinh.

As for imports, Vietnam’s import spending in August edged up 1.7% mom (vs. a 1.1% mom decline in the previous month) to about US$31.1bn (12.8% yoy). As a result, Vietnam witnessed the strong net export value of U$3.9bn in August. For 8M22, import value climbed to US$247.1bn, and Vietnam net export US$5.5bn in 8M22 (vs. a trade deficit of US$3.5bn seen in 8M21). Among Vietnam’s key import products, the items that witnessed the strong import growth rates in August 2022 include crude oil (272.6% yoy), petroleum products (208.5% yoy), fishery (102.2% yoy), corn (76.4% yoy) and cattle feed and supplies (44.3% yoy).

“We slightly raise our forecast for Vietnam’s import growth in 2022F to 13.5% yoy (from a previous forecast of 13.0%) and raise our forecast for Vietnam’s trade surplus in 2022F to US$8.9bn (vs. trade surplus of US$3.3bn in 2021)”, said Mr. Dinh Xuan Hinh.