Vietnam’s exports to rebound: VinaCapital economist
Vietnam’s longest streak of falling exports in over a decade has already bottomed out and export growth is likely to accelerate to some degree throughout 2024, writes Michael Kokalari, chief economist of VinaCapital.
In 2023, a plunge in Vietnam’s manufacturing output and exports were the biggest drags on the economy, just as we predicted in our “Looking Ahead at 2023” report, which was a non-consensus call at that time.
Global export orders are poised to start expanding again because the inventories of U.S retailers and other consumer facing firms look likely to end 2023 down about 5-7% year-on-year, according to recent earnings calls of firms like Walmart, Target, Best Buy, Nike and others. Inventories of U.S retailers had surged by well over 20% yoy in late-2022 and the resulting destocking efforts is reflected in the plunge in global export orders.
Inventory depletion in 2023 explains why Vietnam’s overall exports deteriorated from 11% growth in 2022 to a 4% drop in 2023. With exports equating to over 80% of GDP, a swing of that magnitude has a major impact on GDP growth. We only expect a modest rebound in exports to the U.S this year, partly because U.S credit card debt surged 40% over the last two years, which is constraining U.S consumers’ capabilities to continue purchasing “Made in Vietnam” products and which helps explains why 2023 holiday spending in the U.S was reportedly tepid.
Electronics exports already rebounding
Computers and electronics exports are already rebounding, although exports of smartphones and low value garment products are still falling (note that each of those three product categories accounted for about 15% of Vietnam’s total exports last year). Sales of PCs and other “work from home” products plunged post-Covid, but users have started upgrading to computers that are sufficiently powerful to run AI applications. This helps explain why market research firm Canalys expects global PC sales to rebound from a 12% drop in 2023 to nearly 10% growth in 2024
In contrast, global smartphone sales are only likely to improve from a 3.5% drop in 2023 to 3.8% growth in 2024 according to IDC. Smartphone sales resumed growing for the first time in two years in late-2023 (by about 5% year-on-year), but unlike PCs, for which there is a compelling reason for users to upgrade, consumers do not see sufficiently compelling reasons to upgrade their smartphones.
The net result of all of the above is that “the tech sector has bottomed out led by consumer electronics replacement demand” as Standard Chartered noted in its 2024 global strategy report. Standard Chartered also observed that electronics exports tend to lead overall export recovery/growth in Asia, which bodes well for Vietnam’s overall exports in 2024, while JP Morgan’s 2024 strategy report highlighted the resulting rebound in Asia-wide tech manufacturing output, which bodes well for GDP growth.
Additionally, we note that Vietnam’s imports of the electronic components used to manufacture computers and consumer electronics is surging, which is a reliable leading indicator that companies are ramping up to fulfil the orders in their pipelines.
Finally, garment and footwear exports have not started recovering yet. Firstly, demand from U.S consumers remains weak. Secondly, some production is relocating to countries with cheaper wages (especially Bangladesh). Thirdly, some production is moving out of Asia entirely to minimize the possibility that any of the cotton or other raw material inputs were sourced from China.
All of that said, the overseas customers of garment and footwear factories in Vietnam have generally guided those local firms to expect an increase in orders this year, according to our industry contacts. However, those Vietnamese factory managers also lament that their customers have essentially been giving them small lot and/or last-minute orders rather than the pipeline of 6-12 months’ work as they had in the past.
Nearly one-half of PC distributors expect their sales to increase by over 10% this year, and nearly one-quarter of distributors expect growth of over 25%. Following the passage of the U.S Uyghur Forced Labor Prevention Act at the end of 2021, the number of garment shipments from Vietnam to the U.S encountering issues entering the country surged even though there are no Uyghur minorities in Vietnam.
Consequently, over half of the fashion companies surveyed by the U.S Fashion Industry Association said they now aim to find new suppliers outside of Asia (not just outside China) in order to reduce the possibility that any of the cotton or other raw material inputs used to produce their products could have ultimately been sourced from the Xinjiang Uyghur autonomous region of China.
- Read More
Vietnam manufacturing sector sees 35% increase in Q3 job orders: Adecco
Vietnam’s manufacturing and sourcing sectors saw a substantial 35% year-on-year increase and a 52% quarter-on-quarter increase in Q3/2024 job orders, global workforce solutions provider Adecco said in a reseach report released Thursday.
Economy - Sun, November 3, 2024 | 9:00 am GMT+7
Construction majors to continue capitalizing on public investment projects
Vietnamese construction giants are expected to continue capitalizing on public investment projects for the remainder of this year after delivering strong performances in the third quarter, analysts say.
Companies - Sun, November 3, 2024 | 8:00 am GMT+7
Former Government Office chairman receives $7,900 bribe from property project
Mai Tien Dung, former Minister-Government Office Chairman, received a bribe worth VND200 million ($7,900) from Nguyen Cao Tri, owner of the Dai Ninh eco-resort and urban area project in Lam Dong province.
Society - Sat, November 2, 2024 | 9:13 pm GMT+7
Thai food giant CP enters public-private partnership to promote food system transformation
Thai-invested C.P. Vietnam Livestock JSC and the Partnership for Sustainable Agriculture Vietnam (PSAV) signed a memorandum of understanding Friday on working together to advance sustainable agriculture in the country.
Companies - Sat, November 2, 2024 | 7:16 pm GMT+7
Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year
Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.
Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7
Vietnam likely to grow 6.5% in 2024-2025: VinaCapital
VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.
Economy - Sat, November 2, 2024 | 2:00 pm GMT+7
Major Vietnamese developer Novaland appoints new CEO
Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.
Companies - Sat, November 2, 2024 | 10:24 am GMT+7
Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3
Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.
Southeast Asia - Sat, November 2, 2024 | 9:41 am GMT+7
ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout
Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.
Companies - Sat, November 2, 2024 | 9:13 am GMT+7
Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex
Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.
Industries - Sat, November 2, 2024 | 8:00 am GMT+7
Vietnam becomes Australia’s fastest-growing inbound market
The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.
Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7
Study finds shift in Thai consumers’ spending patterns
Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).
Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7
Energy security, digitalization key to Indonesia's economic growth
The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.
Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7
Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM
Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.
Politics - Fri, November 1, 2024 | 9:25 pm GMT+7
Vietnam, Qatar look to tap potential for energy, oil & gas collaboration
Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.
Politics - Fri, November 1, 2024 | 9:02 pm GMT+7
Thailand bans export of raw palm oil until December
Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.
Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7
- Travel
-
Indian billionaire to visit Vietnam’s Ha Long Bay with 4,500 employees
-
Vietnam in talks on visa exemptions with 15 countries to boost tourism
-
Foreign businesses in Vietnam urge relaxation of visa, work permit requirements
-
AI can be a game changer for Vietnam tourism
-
Google Doodle honors world's largest cave Son Doong
-
Four Vietnam airports to suspend operations as typhoon 'strongest in a decade' approaches