Vietnam may experience a stronger boost from international tourism
According to a recent macroeconomic report from HSBC, experts suggest that with the upcoming summer tourism season and the potential easing of visa restrictions, Vietnam may witness a stronger boost from international tourism. This is a much-needed support for the currently stagnating economy.
Recently, HSBC published a report titled “The Long Road Ahead” analyzing Vietnam’s macroeconomic data for May. The report stated that although Vietnam’s May trade data did not decline further, there is still a long journey before witnessing significant recovery in the trade cycle.
May’s economic activity data did not worsen, but Vietnam shows no signs of ‘bottoming out’ to rebound in the face of increasing difficulties hindering growth, HSBC noted. The General Statistics Office’s data shows Vietnam’s May exports fell 5.8% compared to the same period last year, a slight improvement from the decrease in the previous two months.
Nevertheless, the broad weakening of exports continues to affect Vietnam’s growth prospects, HSBC assessed. Notably, none of the major sectors like electronics, machinery, textiles/footwear, and wooden furniture showed signs of significant recovery. Data until April 2023 shows that orders sharply decreased in Vietnam’s three biggest export markets: the US, China, and the EU.
Meanwhile, imports declined faster than exports, falling 18.3% compared to the same period last year. This may benefit Vietnam’s trade surplus, recorded at 2.2 billion USD, double the average monthly level in 2022. However, with the manufacturing sector being import-dependent, the significant weakness in Vietnam’s imports is also a sign of a sluggish export recovery in the future.
On the brighter side of the bleak economic picture, Vietnam’s service sector continues to be a beacon of light, partially compensating for weaknesses in external sectors. The number of tourists entering Vietnam is trending positively. Despite a slight decrease compared to April, Vietnam once again welcomed over 900,000 tourists, raising the tourism recovery rate to about 70% of the 2019 level.
Furthermore, direct flights to China have significantly recovered, currently at 44% compared to the 2019 level. Vietnam has welcomed a total of 4.6 million international tourists so far this year, achieving 60% of the 2023 target of 8 million international tourists.
“With the upcoming summer tourism season and the potential easing of visa restrictions, Vietnam may witness a stronger boost from international tourism, a much-needed support for the currently stagnating economy,” HSBC emphasized.
Lastly, full-year inflation remained stable in May, bringing full-year inflation down to 2.4% compared to the same period last year. Despite a 1.0% increase in construction costs and materials compared to the previous month, mainly reflecting the electricity price hike a month ago, transportation costs decreased significantly (-3% compared to the previous month) offsetting some inflation risks.
Inflation cooling down is one of the reasons the State Bank of Vietnam (SBV) recently cut interest rates for the third time, the report assessed.
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