2-6-2023 (HANOI) Despite the implementation of stimulus measures to boost business confidence, Vietnam’s economy continues to face challenges, according to a report by Vietnam News. The country’s exports in May recorded a further decline of 5.86 percent compared to the previous year. While this contraction was at a slower pace than April’s decline of 17.2 percent, it underscores the ongoing weakness in demand abroad.
Vietnam has experienced a downward trend in exports since November, with only a brief rebound in February. This persistent decline has prompted the government to introduce support measures. However, analysts suggest that the economy has not yet reached its lowest point, and external factors remain the biggest downside risk to growth.
The General Statistics Office (GSO) revealed that Vietnam’s trade surplus with the United States, its largest export market, narrowed by 22 percent to $31.2 billion in the first five months of the year compared to the same period last year. Key export sectors, including furniture, seafood, clothing, footwear, and smartphones, have been severely impacted, as they are major sources of foreign currency earnings for the country.
In contrast to the decline in exports, Vietnam’s imports plummeted by 18.4 percent in May, extending a seven-month downward trend. This significant contraction in imports has led to a widening trade surplus, reaching $2.24 billion in May, twice the monthly average of the previous year. The trade surplus has contributed to the stability of the Vietnamese dong against the US dollar this year, as noted by HSBC.
However, HSBC also highlighted the concern that the weakness in imports indicates a slow recovery in future exports, considering Vietnam’s import-intensive manufacturing sector. Around 94 percent of Vietnam’s imports in the first five months of the year were raw materials and equipment for production, according to data released by the GSO.
While Vietnam’s industrial output showed a slight rebound of 2.2 percent in May compared to the previous year, the S&P Global Vietnam Manufacturing Purchasing Managers’ Index fell to 45.3 in May. This reading, below the 50.0 threshold that separates expansion from contraction in manufacturing activity, marks a third consecutive month of decline.
Despite these challenges, there is some positive news in the retail sales and services sector, which experienced a growth rate of 11.5 percent in May. This sector has partially offset the external headwinds. However, HSBC points out a clear divergence between different segments within the sector, such as auto sales and tourism services.
