Fall in global demand hurts budgets and exports

Vietnam's export turnover has increased since early this year "thanks to strong trade promotion activities," according to the Ministry of Industry and Trade. 

May's projection is $29.05 billion, up from April's $27.86 billion but down from March's $29.71 billion. After $23.61 billion in January, February reached $25.88 billion.

Export turnover of Vietnamese firms was $7.79 billion in May, up 1%, while that of foreign-invested enterprises, including crude oil exports, was $21.26 billion, up 5.5%.

Vietnam's May export turnover fell 5.9% from the previous year. Vietnamese companies fell 5.9% and foreign-invested firms comprising crude oil decreased 5.8%.

Vietnam's export turnover fell 11.6% to $136.17 billion in the first five months of 2023 due to manufacturing issues and a drop in export orders. 

Foreign exporters (including crude oil exports) earned $100.98 billion, down 11.1%, while Vietnamese exporters earned $35.19 billion, down 13.2%, accounting for 25.8% of total export turnover. 

In the first five months of this year, export turnover fell due to a drop in export orders and pricing. Tea, cashew nuts, pepper, rubber, fertiliser, and plastic raw material all had lower average export prices than previous year. Only rice (7.9%), coffee (3.5%), and coal (38.5%) saw export price increases.

In the first five months of this year, 23 items had export turnover of over 1 billion USD, three more than in the first four months, accounting for 87.4% of total export turnover (with seven export items valued at over $5 billion USD, 65.4%).

Samsung accounts for 90% of the five-month export turnover of $21.178 billion.

Electronics, computers, and their spare parts, mostly produced by FIEs like Samsung, LG, Jing Gong, Daewoo Vietnam, Genesistek Vina, and FC Vietnam, had a five-month export turnover of $20.33 billion, down 9.8% from last year.

Samsung spent $20 billion in Vietnam after investing $670 million in Bac Ninh. However, it will increase. In 2022, Samsung Electronics' Mobile Experience (MX) Division chief Roh Tae-Moon announced a $3.3 billion investment in Vietnam. 

Samsung exported $306 billion to Vietnam from 2018 to 2022. In 2022, Vietnam's export turnover reached over $732 billion, surpassing $700 billion for the first time. 

Causes

The MoIT explained industrial production and import-export declines.

Vietnam's industrial manufacturing sectors are export-oriented and heavily dependent on the global market, but major export partners like the US and EU have been cutting spending on conventional and luxury goods, reducing orders. 

Because domestic production surpasses domestic market need, notably in textiles and clothing, leather and footwear, and electronics. 90% of these items are exported, 10% are consumed domestically.

Cashew, coffee, pepper, and rubber export prices have dropped over the past year, along with volume. The MoIT also noted that export prices of crude oil, petroleum products, ores, fertilisers, and iron and steel had declined, impacting production and commodity exports.

In the first five months of 2023, the US accounted for 26% of Vietnam's export revenue.

The Fed's long-term interest rate rises have reduced excessive inflation. Consumer spending in this nation has slowed due to corporate bankruptcies, job losses, and warnings about the recent economic slump. The US savings rate is rising, indicating more cautious consumption.

“These have impacted Vietnam's exports to this market. Thus, this market's import demand for Vietnam's commodities fell substantially during the same period, estimated at $37 billion, down 19.5% in the first four months and 21% on-year, according to MoIT Deputy Minister Phan Thi Thang. 

Vietnam exports second-most to China. Since January, China has opened its border, but export declines owing to global demand have slowed its economy.

The real estate industry, a vital pillar of China's economy, is still struggling, and unemployment directly affects Chinese consumers' desire for products and the rising standards for commodities.

Vietnam's exports to this market face these primary challenges. According to Thang, Vietnam's export turnover to China in the first five months of 2023 was $19.8 billion, down 9.3% from the previous year.

In May, the consumer price index fell in numerous eurozone countries, halting the slide in EU exports. In May 2023, Germany's inflation rate rose 6.1% year-over-year, while France's fell to 5.1% from 5.9%, Spain's to 3.2%, and Italy's to 7.6%. 

Thus, Vietnam's exports to the EU in the first five months were $18.4 billion, down 6.5% year-on-year.

Exports to ASEAN ($13.9 billion, down 5.1%), the Republic of Korea ($9.5 billion, down 7.1%), and Japan ($9.4 billion, up 0.4%) all decreased.

Vietnam's main export markets are the US, China, and the eurozone, which the Economist Intelligence Unit Limited expects to expand by 0.7, 5.7, and 0.7%, respectively.

Last year, Vietnam exported $109.1 billion from these markets, up 13.3, 4.5, and 17.4%.

State budget revenues

The Ministry of Finance (MoF) said that export-import receipts dropped 20% to $4.58 billion in the first five months of this year due to unfavorable conditions.

According to projections, the state budget overspending in 2023 will be $19.8 billion, or 4.42% of GDP. 

Last year's budget revenues were $77.6 billion, 126.4% of 2022's expectations and 13.8% more than this year's estimated $70.46 billion.

Vietnam's national budget is expected to spend $90.26 billion this year, growing 16.3% from 2022.

“Increase revenues from land use and equitisation of state-owned enterprises; and revenues from taxes and fees to ensure budget balance,” the National Assembly Financial and Budgetary Committee advised.

The MoF reported a $5.06 billion state budget surplus in the first five months of 2023. 

Meanwhile, overall sales are expected to exceed $28 billion, 47.5% of the year's expectations and 6% lower than last year.

Domestic revenues are anticipated at $27.77 billion, down 2.9% from previous year. Crude oil export revenues fell 12.1% to $1.1 billion.

Source: Nhân Dân