In the Asian macroeconomic report just released on December 22, HSBC pointed out that major trading partners face a domestic slowdown that challenges Vietnam’s short-term prospects. Male. Accordingly, Vietnam’s exports are about to enter the “hibernation” period.
After growing more than 17% year-on-year in the first three quarters of 2022, Vietnam’s export growth decelerated rapidly in October and November saw a significant decline year-on-year. in the past two years. The main reason comes from the electronics sector, which accounts for about 35% of Vietnam’s total exports. Even so, recent data shows that export declines are taking place in many sectors, including textiles, footwear, wood products and machinery. The economic downturn in the US made the situation even more difficult because the US is the largest market for many export items from Vietnam.
A positive bright spot is that domestic demand has brought some relief, thanks to the continued recovery of the labor market. While the unemployment rate has fallen to 2.3% as of the third quarter of 2022, it is still likely to fall further as more jobs are concentrated in the tourism-related sector. Although visitors have started to return, the number of visitors to Vietnam is still less than 20% of 2019.
With the advantages of reopening still remaining, HSBC Vietnam raised its growth forecast for 2022 to 8.1%, from 7.6% in the old forecast. However, the challenges are likely to weigh more heavily in 2023, especially after the effects of reopening fade and the impact of high inflation begins to take hold, albeit with a delay. Therefore, HSBC forecasts growth will slow to 5.8% (old forecast was 6%).
According to HSBC Vietnam, the biggest risk to Vietnam’s growth is increasing trade difficulties. Vietnam is not immune to the effects of this significant slowdown in global trade, in other words, the “slow down” period has arrived.
Weak export demand has led to a significant decline in Vietnamese exports, with November marking the first significant drop in two years. The manufacturing PMI in November also fell into a contraction for the first time in 2022. New orders, selling prices and employment all fell, showing that market sentiment is not good. Commodities benefiting from strong demand during the pandemic, electronics and textiles/leathers, are seeing a “slow” phase as demand shifts to services and global growth slows.
Currently, the US and EU account for more than 40% of total exports. The US is also the dominant import market with a number of major export industries, with more than half of Vietnam’s machinery exports going to the US market.
Another major export industry that also depends heavily on the demand of the US market is wood products (about 60%). Slowing asset market activity in Western countries brings downside risks to Vietnam’s exports.
But the picture is not all gray. Despite the cyclical headwinds, businesses continue to invest in Vietnam. Tech giants like Samsung and LG recently announced they will continue to invest in Vietnam, further showing the long-term appeal of Vietnam.