20-6-2023 (HANOI) Vietnam’s apparel export earnings declined by 17.8 percent to $12.3 billion in the first five months of the year, according to the latest statistics from the General Statistics Office. The drop in earnings can be attributed to the sluggish global demand for textiles and garments.
Textiles and garments, which rank as Vietnam’s second-largest export earner after smartphones and electronics, generated $44 billion in revenue in 2022, contributing to the country’s fastest annual economic growth since 1997.
However, the industry has encountered challenges this year as consumers in major markets like Europe have reduced their spending on clothing, as reported by the Vietnam News Agency.
Vietnam holds a significant position as one of the world’s largest textile and garment exporters. Nevertheless, Vietnamese manufacturers are grappling with a significant decline in orders, with the global textile market expected to contract by 8 percent this year to approximately $700 billion. This projection is lower than the demand observed in 2020 during the onset of the COVID-19 pandemic, according to a report by Vinatex, the country’s largest textile and garment maker.
Cao Huu Hieu, the CEO of Vinatex, expressed concerns about the slowdown in orders and the need to reduce prices for finished products while maintaining quality, which has impacted the company’s profit margins.
Furthermore, the depreciation of the dong currency has led to increased costs for importing raw materials, making it challenging for garment exporters to fulfill their orders, which are typically booked months in advance, explained the CEO of Vinatex.
The rising interest rates in the initial months of the year have further compounded the difficulties faced by local manufacturers, he added.
Additionally, Vietnam is no longer enjoying the advantage of low labor costs, as the average monthly wage for garment workers currently stands at around $300, surpassing the global average of $200, according to Trading Economics.
The textile and garment industry has been hit harder due to ongoing power shortages in northern Vietnam, which have constrained production, according to local manufacturers.
Businesses in the textile and garment sector are hopeful that the second half of the year will bring relief, with expectations of easing inflation pressures in major export markets such as the United States and Europe, coupled with the benefits derived from new-generation free trade agreements, potentially leading to a resurgence in demand.
The country’s textile and apparel association forecasts exports to reach approximately $45 billion by the end of this year.
