Vietnam’s trade surplus may gradually narrow down

>> Rebound in demand helps enterprises boost export growth

Export turnover of goods in May showed signs of recovery with 5.7% mom increase, up 15.8% yoy to USD 33.81bn. In May, Vietnam registered a trade deficit of USD 1bn, despite a substantial rise in export turnover. This deficit was primarily driven by an even larger increase in imports, attributed to the surge in imported equipment, machinery, and raw materials.

Many businesses have been expanding their operations to fulfill orders from newly established markets, formed through trade agreements between Vietnam and various international partners. Key commodities with high export value are other basic metals and products (111.6% yoy), rice (56.4% yoy), and textile fibres (52.7% yoy).

For 5M24, export turned over accumulated to USD 156.77bn (15.2% yoy). The export items with the largest negative growth include toys, sports equipment and their parts (-13.91% yoy), clinker and cement (-9.12% yoy) and paper and paper products (-2.13% yoy). Nonetheless, exports still have some bright spots in growth, such as cameras, camcorders and their components (61.18% yoy), coffee (43.94% yoy), and furniture made of nonwood materials (34.2% yoy).

In terms of export markets, the US remains our primary market, with export turnover of USD 44bn, up 2% yoy. Export to the E.U rose 16.1% yoy to USD 20.7bn, meanwhile, export to ASEAN countries amounted to USD 15.3bn (12% yoy).

The import turnover of goods is estimated at USD 33.81bn (29.9%yoy, 12.8% mom) in May, and USD 148.76 bn in 5M24 (18.2% yoy). China was the largest import market of Vietnam with a turnover of USD 54.9bn (33.1% yoy). As of May, four import products with a value of over 5 billion USD (accounting for 47% of the total import turnover) are: electronic goods, computers and their parts (27.3% yoy), machinery, instrument, accessory (15.4% yoy), fabrics (13.3% yoy) and iron, steel (28.3% yoy).

>> Find opportunities in niche markets to increase exports

MBS forecasts that exports will increase by 10 - 12% in 2024, with a trade surplus of USD 21 - 24bn (USD 28 bn in 2023) based on the following factors:

First, according to WTO’s April report, global goods trade is predicted to grow by 3.3% in 2024 as inflation pressures are expected to abate this year, allowing real income to bounce back – especially in advanced economies – therefore, encourage the consumption of manufactured goods.

Second, positive signs of foreign direct investment (FDI) in Vietnam are expected to play a crucial role in commercial activities, Together with that are the revolutionizations in trade and customs policy have reinforced the efficiency of imports management, simplified administrative formalities, and trimmed costs and time for enterprises.

However, in MBS’s view, Vietnam’s export growth in 2024 still enduring certain obstacles, including: transportation costs may spike due to geopolitical conflicts; rising competition from rival exporting countries such as China, Indonesia, Thailand, etc. Moreover, Vietnam’s partner countries are experiencing a slower economic recovery as Fed is holding its high interest rate longer than expected. In addition, Vietnam‘s trade openness is relatively high, hence, immensely being affected by the global economic situation. Consequently, this will pose challenges for key industries with considerable export turnover, such as textile fibers, wood, and electronics.