Don't rejoice too early at January’s big trade surplus: economist

Vietnam should not consider its January trade surplus of $2.92 billion as a big achievement, but instead look at the sharp decrease in imports as a cause for concern, said Dr. Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy.

What do you think about the trade surplus of $2.92 billion in January and the import-export picture for 2023?

I think we should use the word "hopeful" to describe import and export activities in 2024. Exports depend mainly on market demand. The world is facing many difficulties but there are still bright spots to look forward to.

Specifically, market demand is expressed through economic growth figures. According to forecasts by international organizations, the world economic situation, including Vietnam's major partners, will witness changes compared to 2023. In general, the recovery process will still struggle and average growth is expected to be lower than that of the past decade (2012-2022).

The IMF forecast world economic growth in 2024 at 3.1% - slightly higher than 2023. This brings hope that global demand will recover somewhat.

After a period of stagnation, businesses' inventories have decreased and demand may bounce back. To a certain extent, this was reflected in the increase in the S&P Global Vietnam Manufacturing PMI which climbed to 50.3 in January 2024 from 48.9 in the previous month. Orders for some industries such as textiles-garments and footwear have also shown signs of improvement as many large businesses say they have orders to the end of the first quarter.

However, the January import-export turnover figure does not have much meaning compared to the same period last year. Perhaps we have to wait for data in February or the first quarter of 2024, because the Lunar New Year holiday (Tet) 2023 fell in January, but this Lunar New Year falls in February (the extended Tet holiday affects the indexes).

From 2023 to January 2024, the trade surplus contributed to a healthy international payment balance, reducing pressure on exchange rates. But when we consider thoroughly, we find it worrying because imports have dropped sharply.

Among the four groups of imported goods, the consumer goods group only accounted for 7-8%, followed by fuel. The two remaining and largest groups - production inputs and intermediate goods such as components, machinery and equipment decreased, reflecting a poor business environment with few orders. Going along, production capacity as well as export and investment capacity also declined. This was partly shown through the slowdown in private investment figures in 2023.

However, imports and exports in 2024 still have bright spots to look for. For example, foreign direct investment (FDI) continues its upward momentum (both committed and disbursed capital) thanks to the shift of supply chains, the upgrading of Vietnam's strategic partnerships in 2023, and market expansion through the implementation of free trade agreements (FTAs).

Next is the effort to improve the business investment environment, especially associated with new trends such as high technology, innovation, green economy and digital economy. The warming market also makes confidence gradually return. This brings expectations that private investment in 2024 will be a bit busier.

It is forecast that the 2024 trade surplus will not be as big as last year. The 6% export growth target represents caution, but it will still require great effort to achieve.

One of the issues facing exports in 2024 is green transition. This can be a matter of survival for many exporters to the European market. In the current context, do you think that exports will become more difficult?

Green transition is no longer just a matter of political commitments at the national strategic level, but it is becoming a market requirement, led by the market and a matter of survival, and is the "rice, clothing, and money" of export enterprises.

Green transition is present in many agreements and commitments between countries, such as high-quality FTAs like the EU-Vietnam FTA (EUFTA). However, we are not only implementing green transition because of our commitments; it has now become a lifestyle and a modern consumption trend.

Many markets now require products to be green, safe and humane, not to mention unique. This trend is increasing and becoming stronger due to the rapid growth of the middle class and young people.

To meet this trend, many countries require the production and business process, and the entire supply chain, to meet green and circular standards, not only issues of food hygiene and safety. Business models are also needed to meet the requirements of saving raw materials and resources, producing fewer emissions, and increasing product durability.

Green transition for Vietnam is both a challenge and an opportunity to create new development momentum. Starting this year and especially in the next 1-2 years, developed countries will begin to apply these new rules and we will have to make preparations to well respond to them.

The main foundation is environmental, social, and corporate governance (ESG) - a set of indicators to measure the sustainable development of a business. Along with meeting the set of ESG indexes are requirements for measuring and reporting emissions, and participating in the carbon trading market. This also requires preparing a policy vision corresponding to the new standards.

Currently, in terms of political commitment, we have a strategy for and have also been implementing green transformation. However, the process remains quite slow and it is necessary to accelerate the completion of legal frameworks related to green criteria, circular economy and green finance, associated with efforts to meet the criteria of main export markets.

Do you think that the concept of green finance in Vietnam is currently quite vague and not given due attention?

Vietnam already has green financial products, such as green bonds and green credit. The Ministry of Finance has also issued guidance on green bonds and sustainable bonds. The State Bank of Vietnam (SBV) has issued decisions on green banking development, while the State Securities Commission has provided guidance and training on green stocks and ESG. However, the current scale of green finance is still small.

Amid international pressure and market demands, the green transition trend is inevitable. But for green transition and green finance to truly be as meaningful as expected, there is a lot to do, from policies, mechanisms and criteria to resources. Besides, there must be coordination with international organizations, harmonization of international standards and rules, as well as mutual recognition of products.

To do these things, it requires high decisiveness and determination. There are many new things that both Vietnam and the world still have to explore. Green transition will be hard to realize if we do not change corporate governance and create an environment for officials to dare to think and dare to do for the common good.

Vietnam’s export and import turnover in January 2024 was estimated at $64.22 billion, up 37.7% over the same period last year. Of which, $33.57 billion came from exports, a year-on-year increase of 42%, and $30.65 billion from imports, up 33.3%, resulting in a trade surplus of $2.92 billion.

This was the highest increase in export turnover since April 2022. Compared to the negative growth rate in 2023, this is a good sign bringing brighter expectations for the economic picture in 2024.

This year, the Ministry of Industry and Trade is aiming for an export growth rate of 6% compared to 2023, with an estimated turnover of $375.8 billion.