Exports in Vietnam have encountered significant obstacles due to the global economic slowdown, market fluctuations, policy adjustments by major economies, and increasing trade protectionism. Achieving the 6% growth target for 2023 remains a formidable challenge for the country’s main growth engine. This post examines the impact of declining world aggregate demand on Vietnam’s exports and explores measures to overcome these challenges.
Declining World Aggregate Demand and its Implications
- The aftermath of the “Covid-19 storm” has resulted in inflation and a deep global economic slowdown, affecting major economies worldwide.
- High inflation in countries like the United States, Europe, and the United Kingdom has reduced purchasing power and altered household spending patterns.
- The decline in aggregate demand from major trading partners has heavily affected Vietnam’s export-dependent economy.
- In the first half of 2023, Vietnam witnessed significant drops in exports to markets such as the US, EU, China, South Korea, Japan, and ASEAN.
Impacted Export Commodities
- Key export sectors, including phones and components, electronics, computers, textiles, agriculture, forestry, and fisheries, experienced substantial declines.
- Textiles and garments, footwear, phones and components, wood and wood products, and various fertilizers recorded significant decreases.
- The seafood industry faced multiple challenges, including the impact of the Russia-Ukraine conflict, the Covid-19 pandemic, and inflation in major export markets.
Imports and Stagnant Production
- Import turnover declined by 18.2% in the first half of 2023, indicating stagnation in production activities.
- Capital goods imports, a measure of investment, decreased by 18.5% during the same period.
- The Vietnam Manufacturing Purchasing Managers’ Index (PMI) showed a continuing decline, with weak demand and deteriorating market conditions impacting new orders.
Addressing Challenges and Restoring Growth
- Despite challenges, some enterprises reported higher orders in Q2/2023, indicating potential for growth.
- To counter declining export orders, businesses should focus on diversifying markets and products.
- Vietnam needs to address both internal and external impacts, including global economic growth slowdown, market fluctuations, and policy adjustments.
- Developing the domestic market, managing inflation, and implementing effective interest rate and exchange rate policies are crucial for economic recovery.
Conclusion: Vietnam’s export sector faces formidable challenges amid a global economic slowdown. By diversifying markets, promoting domestic consumption, and implementing appropriate policies, the country can overcome these hurdles and restore growth. It is essential for enterprises and policymakers to work together to navigate the complexities and uncertainties of the global trade landscape.