Vietnam posts strong exports and industrial output in July
Its trade surplus on goods shrinks from a year ago on the back of rising imports to fulfil new orders
[HO CHI MINH CITY] Vietnam recorded a substantial year-on-year rise in exports and industrial production in July, helped by strong external demand in the electronics sector, and fuelling the South-east Asian country’s economic growth for the rest of the year.
Estimates from the government’s statistics body (GSO) on Monday (Jul 29) showed that exports for July grew by 19.1 per cent year on year to US$35.92 billion – the largest gain since January.
Smartphones and components, as well as computers and electronics, were the main export revenue generators. Exports of smartphones and components climbed 19.1 per cent year on year in July to US$5.3 billion; outbound shipments of computers and electronics jumped 22.5 per cent to US$6.2 billion.
Imports in July rose more steeply than the year before – by 24.7 per cent – to nearly US$33.8 billion. This shrank the country’s trade surplus: For July, the surplus was US$2.12 billion, down from last year’s US$3.07 billion; for the first seven months, the surplus was US$14.08 billion, also lower than last year’s US$16.05 billion.
Dinh Quang Hinh, head of macro and market strategy at VNDirect Securities, said: “The shrinking trade surplus from a year ago was driven by sharp rises in input imports to serve production, which suggests a strong growth outlook for Vietnam’s exports towards the end of this year.”
Robust exports contributed significantly to Vietnam’s growth in the first half of 2024, with the gross domestic product expanding 6.42 per cent from a year ago, making it the second-highest advance since 2020. The legislature has set a growth target of 6 to 6.5 per cent for 2024.
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Industrial output jumped year on year for the fifth month, at 11.2 per cent in July, but this was a slowdown from the 12.4 per cent expansion last month. Between January and July, industrial production increased 8.5 per cent from the year before.
The rise in trade and industrial production also aligns with the June purchasing managers’ index survey findings of S&P Global, which pointed out that manufacturing activities in Vietnam accelerated strongly as factories amassed the sharpest increase in new orders since March 2011.
Up to Jul 20, disbursed foreign direct investment (FDI) grew 8.7 per cent from the year before to about US$12.55 billion, the highest amount in the January-July period in the past five years. Eighty per cent of that sum was poured into the manufacturing and processing sector, the GSO noted. FDI pledges rose 10.9 per cent from the year before to US$18 billion.
“The ongoing upturn in the global electronics cycle will continue to support both exports and industrial production for the rest of the year,” noted Adam Ahmad Samdin, assistant economist at Oxford Economics.
However, the rate of input cost inflation quickened in June, S&P Global noted, hitting a two-year high on the back of higher costs of transportation, fuel and imported items. Given this, manufacturers reportedly raised their selling prices by the largest degree in two years.
In July, Vietnam’s consumer prices edged up to 4.36 per cent from the year before, bringing the average inflation rate in the first seven months to 4.12 per cent.
Analysts expect inflation to subside in the coming months, and say it is unlikely to exceed the government’s cap of full-year inflation at 4.5 per cent.
The average core inflation, which excludes volatile items, was recorded at 2.73 per cent for the January-July period.
Slow domestic recovery
The GSO noted that retail sales grew faster year on year in July, at 9.4 per cent, against 9.2 per cent in June, largely thanks to the thriving tourism sector.
Vietnam’s more relaxed visa policies and strong tourism campaigns have led to a surge in international arrivals, which came close to 10 million in the first seven months of 2024.
This was 51 per cent higher than last year’s figure for the corresponding period, and surpassed the pre-pandemic level in 2019.
Analysts from BMI, a unit of Fitch Solutions, noted in a recent report that they anticipated a continued rise in foreign tourist arrivals. Tourists from China, who make up a third of all visitors, are already at 70 per cent of pre-pandemic figures, with recovery likely to continue.
Measured on a year-to-date basis, growth in retail sales has yet to match last year’s, and remains a notch below the pre-pandemic pace. It came in at 8.7 per cent in the first seven months of 2024, lower than the 9.8 per cent for the same period last year.
Credit growth also posted a lacklustre performance at 5.26 per cent from end-2023 till Jul 17; the State Bank of Vietnam, the country’s central bank, has set a full-year target of 15 per cent.
As things stand, Oxford Economics’ Samdin said he believed the regulator would keep its policy rate accommodative to aid the continued recovery of the domestic sector, though a key risk would arise from the weak dong.
Over the past months, following various interventions by the central bank, the Vietnamese dong narrowed its year-to-date depreciation against the US dollar from around 5 per cent in May to the current estimated 4 per cent.
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