Vietnam, an export-driven economy, is expected to register an 11.4% export growth thanks to the Regional Comprehensive Economic Partnership (RCEP), according to the World Bank.
The estimate is under the full scenario in the bank's report “Estimating the Economic and Distributional Impacts of the Regional Comprehensive Economic Partnership."
The trade pact, which took effect on January 1, 2022, is a free trade agreement among 15 Asia-Pacific nations namely Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. The 15 member countries account for about 30% of the world’s population (2.2 billion people) and 30% of global GDP ($29.7 trillion), making it the largest trade bloc in history.
"Exports and imports are expected to rise for all RCEP member countries," the report said.
“The RCEP has the potential to lift 27 million additional people to middle-class status by 2035. It will also boost wages, with faster gains in sectors that employ larger shares of women. The aggregate effects mask large variety of outcomes across countries, with Vietnam expected to register the highest trade and income gains.”
The study predicted a substantial increase in agricultural and manufacturing exports from RCEP countries. Meat products, food and beverages, textiles, chemicals, and apparel are the sectors that will register the fastest growth rates of exports.
Singapore’s DBS Bank in a report said it expected Vietnam to be a key beneficiary within the ASEAN because trade integration between Vietnam and other RCEP members is already high, and should grow tighter as companies tap RCEP benefits.
Vietnamese domestic firms’ participation in RCEP can offer opportunities to raise their exports and be more active in regional value chains, if they can gain access to cheaper inputs and adapt to increased competition, DBS noted.
"The U.S., Vietnam’s single largest trading partner at present, has taken RCEP’s market share, rising to almost 30% of the latter’s total exports."
The U.S. and China continued to play significant roles in Vietnam’s economy in the first quarter of 2022, with the former as the country’s largest export market and the latter serving as its biggest seller.
Vietnam’s exports in the first quarter of this year reached $88.58 billion, up 12.9% from a year ago, the General Statistics Office reported. The U.S. accounted for $25.2 billion of the total. Imports grew 15.9% to $87.77 billion, with China representing $27.6 billion of the total. Vietnam enjoyed a trade surplus of $810 million.
With the RCEP agreement, Vietnamese products made from Chinese inputs can potentially increase trade. For instance, Vietnamese textile, garments, and footwear made from Chinese materials can enjoy favorable tariffs when shipped to Japan, according to the Singaporean bank.
European business confidence in Vietnam’s investment environment continued to rise at the start of 2022, reflected in the business climate index (BCI) from EuroCham. For this year’s first quarter, the index climbed to 73 points, once again reaching its highest point after the fourth wave of the pandemic in the country.
European business leaders are generally showing increasingly improving attitudes towards the prospective growth of the Vietnamese economy, EuroCham Vietnam said in a press release. More than two-thirds of respondents for the index believe the economy is more likely to stabilize and improve in the second quarter of this year, higher than 58% who believed so in the fourth quarter of 2021.