Vietnam has smallest trade surplus in 5 months in October
Exports climb at a softer pace of 10.1% on year, while imports are up 13.6%; analysts expect pressure on exports if Trump becomes US president
[HANOI] Vietnam in October had the smallest trade surplus in five months as exports continued to grow at a slower pace than imports, going by data from the government’s statistics body on Wednesday (Nov 6).
The trade surplus of goods for the month fell to US$2 billion from US$2.7 billion a year ago and US$2.3 billion in September. As a result, the year-to-October merchandise gain narrowed to US$23.3 billion, versus last year’s US$24.8 billion.
In October, the trade-reliant country’s exports continued to climb year on year to US$35.6 billion, though at a softer pace of 10.1 per cent.
It was backed by robust increases in the outbound shipment of computers and electronics (15.5 per cent), textiles and garments (25.2 per cent), as well as machinery, equipment and tools (17.1 per cent).
Smartphones and components, a major export category for the South-east Asian country, however, contracted further for the third consecutive month by 11.9 per cent year on year in October to US$4.6 billion, possibly due to soft Samsung sales amid fierce global competition.
Imports during the month rose steeply, up 13.6 per cent from a year ago at nearly US$33.6 billion.
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Should Donald Trump secure another term as US president, as early results seem to indicate, experts predict that America could impose more tariffs or export restrictions on Vietnam due to its growing trade surplus with the Western giant. Vietnam’s increased reliance on Chinese imports and foreign direct investment (FDI) might also come under closer scrutiny.
“There is room for Vietnam to reconsider its trade structure and diversify its export markets to include more countries beyond the US, which already accounts for about a third of its total export value,” said Pham Vu Thang Long, chief economist at Ho Chi Minh City Securities Corporation (HSC).
In its survey for the October purchasing managers’ index, S&P Global reported that Vietnam’s manufacturing returned to growth in both output and new orders despite the lingering impact of Typhoon Yagi, which struck the regional manufacturing hub in early September.
“Some companies are still suffering from the effects of the storm, limiting rates of expansion,” noted Andrew Harker, economics director at S&P Global Market Intelligence.
“We should hopefully therefore see growth pick up, as more manufacturers get back up to full capacity towards the year end,” he added.
Industrial production also grew from a year ago, though at the slowest pace since April at 7 per cent last month, and at 8.3 per cent from January to October. The softening in October was attributed to a moderate increase in manufacturing (8.8 per cent) and a decline in mining output (-10.4 per cent).
Subdued retail sales growth
Retail sales growth eased to 7.1 per cent year on year in October, the slowest pace in a year, with tourism turnover falling by 1.9 per cent.
For the January to October period, retail sales grew by 8.5 per cent in 2024, failing to match last year’s 9.8 per cent.
Meanwhile, the number of international arrivals to Vietnam climbed by 27.6 per cent year on year to 1.4 million last month, faster than the 20.9 per cent rise in September.
The total arrivals in the first 10 months of 2024 managed to reach 97 per cent of the pre-pandemic level, though the October figure alone equalled only 87 per cent of the 2019 benchmark.
HSC’s Long opined that retail sales towards the end of this year may remain subdued, falling significantly from the double-digit rates during the pre-Covid periods.
He attributed this slower growth momentum partly to reduced spending by fewer Chinese tourists, as well as restrained domestic consumption to compensate for the repair expenses following the destructive typhoon.
The consumer price index in October increased 2.9 per cent year on year, compared with the previous month’s pace of 2.6 per cent.
The average inflation rate in the first 10 months, however, remained benign at 3.8 per cent, below the country’s full-year target range of 4 to 4.5 per cent.
Local currency under pressure
The local currency has been under pressure due to the ongoing strengthening of the US dollar. The US dollar/Vietnamese dong pair traded at around 25,280 at the end of October, marking a depreciation of the dong at about 4 per cent against the greenback so far this year, according to data compiled by Bloomberg.
“Structurally, what the Vietnamese dong had been able to count on (for a few years now) is the various trade agreements forged and concomitant flow of FDIs into Vietnam as foreign investors diversify their supply chain away from China,” stated analysts at Maybank in a note on Oct 30.
Realised FDI growth remained firm at 8.8 per cent from January to October at US$19.6 billion compared with the corresponding period a year earlier. Pledged capital in the first 10 months picked up slightly by 1.9 per cent year on year to US$27.3 billion on a high base in the same period last year.
Analysts also believe the dong is going to face pressures arising from new economic and political developments in the United States.
“(The State Bank of Vietnam) may hold the line around 25,500 for the spot unless Donald Trump becomes the next US president and potentially strengthens the US dollar a tad more,” Maybank analysts had added.
Last month, Vietnam’s Prime Minister Pham Minh Chinh said that the government wanted to boost economic growth above an expected rate of 6.8 to 7 per cent in 2024. In the third quarter, annual growth accelerated to a two-year high of 7.4 per cent, from a 7.1 per cent expansion in the second quarter.
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