According to a Bloomberg report in the United States, in July, Vietnam’s exports fell for five consecutive months, the longest decline in 14 years. This foreign trade-dependent economy may struggle to achieve its economic growth target of 6.5% this year.
According to data released by the Vietnam Statistics Bureau on the 29th, Vietnam’s exports contracted by 3.5% in July, exports in the first seven months of 2023 fell by 10.6% year-on-year to US$194.73 billion, and imports fell by 17.1% to US$179.5 billion. Among them, the export value of smartphones, Vietnam's largest foreign exchange earning product, fell by 18.3% from January to July 2023 to US$27.8 billion.
The overall inflation rate in Vietnam was little changed at 2.06 percent in July compared with the same period last year, the data showed. House prices rose 1.9 percent year-on-year, and core inflation, which excludes food, fuel, health care and education services, rose 4.1 percent year-on-year in July. This year, the Vietnamese government has set a target of annual GDP growth of 6% to 6.5%. In the first quarter, Vietnam’s GDP grew by 3.32% year-on-year. The decline in exports puts Vietnam, which relies on foreign trade, at risk of failing to achieve this goal.
Vietnam's Ministry of Industry and Trade has previously warned that weak demand due to the cloudy global economic situation could hurt Vietnam's export pattern. Marketscreener, an American investment research firm, quoted a Vietnamese newspaper as saying that the Vietnamese economy may continue to face some risks before the end of this year.
The textile industry is the "backbone" industry that solves Vietnam's employment rate, but this year, the industry is also facing many difficulties. According to data from the Ho Chi Minh City Chamber of Commerce in Vietnam, Vietnam’s exports fell by 11.9% in the first quarter of this year. Among them, export orders for the textile industry fell by 70%-80%, resulting in the shutdown of 42,900 factories. In the second quarter, Vietnam's textile export orders fell by another 80%. According to statistics from the Statistics Office of Vietnam, more than 200,000 workers in the country lost their jobs in the second quarter of this year. According to the Vietnam Textile and Garment Association, due to the global economic slowdown, Vietnam’s textile exports to the United States will drop by 27.1% in the first five months of 2023, while exports to Canada and the European Union will drop by 10.9% and 6.2% respectively.
Textile enterprises currently have insufficient cash flow and it is difficult to obtain loans, resulting in bad debts. The future will experience a difficult period. Compared with Vietnam's competitors in Asia, the 9%-11% loan interest rate of the State Bank of Vietnam has further increased production costs.
Labor is no longer cheap is also a major challenge facing Vietnam's textile industry. The rising cost of living makes it difficult for Vietnam to continue to maintain a competitive model based on "cheap labor". At present, the average monthly salary of Vietnamese textile workers is about US$300, which is much higher than that in Bangladesh (US$95), Cambodia (US$190) and India (US$145).
Bloomberg said that stable inflation has given Vietnam's central bank room to further reduce borrowing costs to support businesses, and the Vietnamese government is also seeking ways to boost the economy. On the 27th, Vietnamese Prime Minister Pham Minh Thanh asked the Central Bank of Vietnam to formulate measures to improve bank loans before the end of this month, and at the same time called again to lower loan interest rates to stimulate business activities. The State Bank of Vietnam has cut interest rates four times this year, and expressed concerns about bad debts, pressure on the banking system and currency, and will adjust its loose monetary policy.
