Vietnam’s 2023 foreign trade under review

Now in its eighth year of publication, the Vietnam Import - Export Report from the Ministry of Industry and Trade touches on a range of matters, such as product origin; the execution of the EU-Vietnam Free Trade Agreement (EUVFTA), the UK-Vietnam Free Trade Agreement (UKVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Regional Comprehensive Economic Partnership (RCEP); negotiations, signings, and enhancements of other free trade agreements (FTAs); and advancements in trade promotion and export-import operations.

The latest version delineates the landscape in 2023, which proved to be a challenging time for Vietnam’s economy after impacts were experienced from both internal and external factors. With its notably open economy, Vietnam felt repercussions from global economic slowdowns, market volatility, and policy adjustments in major economies, particularly regarding interest rates and exchange rates. Key drivers of Vietnam’s growth, such as investment, exports, and domestic consumption, encountered numerous hurdles.

Export challenges persisted, including uncertain markets, inadequate orders, soaring fuel prices, and rising production costs. Heightened competition and escalating technical barriers in export markets also impacted production, employment, and the livelihoods of workers.

The report underscores that these obstacles in foreign trade were not exclusive to Vietnam but were common in all economies reliant upon exports but buffeted by shrinking global demand. As efforts in integrating Vietnam’s open economy deepen, substantial benefits will be reaped during favorable global market conditions but vulnerabilities very much make their presence felt amid any fluctuations.

Vietnam faced challenges last year in falling supplies of raw materials and lower consumer demand. Preliminary figures indicate $354.7 billion in export value, down 4.6 per cent against 2022, and $326.4 billion in import value, down 9.2 per cent. Vietnam still posted a trade surplus of $28.3 billion as exports and imports both dipped. The report highlights the positive aspects amid the ongoing global economic slowdown, with exports showing signs of recovery in the latter part of the year.

Rejuvenated exports

Exports displayed clear signs of recovery over the course of 2023. Though down 11.8 per cent year-on-year as of the end of the first quarter, improvements emerged from the beginning of the second quarter onwards. Each subsequent month saw higher export volumes, with May’s figure rising 0.6 per cent against April, June 5 per cent over May, July 2.1 per cent compared to June, and August 9 per cent against July. By the end of the third quarter, the export decline had narrowed to 8.5 per cent year-on-year. Overall, exports totaled $354.7 billion for the year as a whole, down 4.6 per cent compared to 2022.

Of note, there was significant recovery seen in exports from the domestic economic sector as well as in agricultural and fisheries products. Exports by domestic enterprise stood at $95.5 billion, down 0.3 per cent compared to 2022, in contrast to the steeper decline in those from foreign-invested enterprises (FIEs) (including oil), which totaled $259.1 billion, down 6.1 per cent.

Exports of agricultural and fisheries products rose over 2022, with several product categories experiencing substantial growth, such as fruit and vegetables, reaching $5.6 billion, up 66.7 per cent, rice $4.7 billion, up 35.3 per cent, and cashews $3.6 billion, up 18.1 per cent.

Amid lower exports to major markets was an uptick in shipments to African, Eastern European, Northern European, and Western Asian nations. Exports to African countries hit $3 billion, marking a 4.5 per cent increase against 2022, while those to Saudi Arabia increased $1.1 billion, or 57.5 per cent, and to the UAE $4 billion, or 4.3 per cent.

The report also identified the top and bottom ten cities and provinces nationwide in terms of export turnover during 2023. Leading the pack was Ho Chi Minh City, with turnover of $42.46 billion, followed by northern Bac Ninh province with $39.30 billion and southern Binh Duong province with $30.61 billion. Conversely, the ten provinces posting the lowest export turnover were northern Lai Chau, Dien Bien, Son La, and Bac Kan, south-central Ninh Thuan, northern Cao Bang, the central highlands’ Dak Nong, northern Ha Giang, central Quang Binh, and northern Tuyen Quang.

The five localities with the highest export growth compared to 2022 were northern Lang Son province, up 107 per cent, Ha Giang province, by 65.8 per cent, north-central Ha Tinh province, by 49.7 per cent, Cao Bang province by 42.7 per cent, and northern Ha Nam province, by 35.8 per cent.

On the other hand, the five localities experiencing the most pronounced decline in export growth compared to 2022 were Dien Bien province, down 47.4 per cent, the Mekong Delta’s Ca Mau province, by 29 per cent, Lai Chau province, by 22.6 per cent, central Thua Thien-Hue province, by 18.8 per cent, and the Mekong Delta’s Bac Lieu province, by 15.8 per cent.

Despite the overall positives, export-import operations revealed certain limitations. Specifically, exports to almost all major markets were down, though the rate of decline steadily diminished over the course of the year. Exports to the US witnessed an 11.3 per cent fall compared to 2022, while those to the EU were down 6.6 per cent, Japan 3.8 per cent, South Korea 3.3 per cent, and ASEAN 4.5 per cent.

While a trade surplus bolsters monetary policies and enhances foreign reserves, an increasing surplus due to sharper declines in imports than in exports suggests challenges in producing goods for export. Weak demand and fewer orders for imported raw materials, machinery, and equipment for production were clear throughout 2023.

Imported manufacturing inputs down

Figures reveal that imports totaled $326.4 billion in 2023, a 9.2 per cent decline against 2022. Nonetheless, the composition of imported goods remained relatively stable, predominantly catering to production and export requirements. Imports aimed at production and domestic consumption totaled $288.5 billion, constituting some 88.4 per cent of import turnover nationwide.

Imports crucial for export industries, such as telecommunications equipment and parts, computers, electronic devices and components, and textiles, leather, and footwear materials, all experienced downturns. Notably, imports of materials for textiles, garments, leather, and footwear witnessed substantial falls compared to 2022, with fabric imports down 11.5 per cent, textile, garment, and leather material imports 9.9 per cent, yarn imports 13.9 per cent, and cotton imports 29.7 per cent.

China remained the primary supplier of textile and garment materials to Vietnam throughout last year. Imports from Vietnam’s northern neighbor accounted for 53 per cent of all textile and garment material imports, up from 50.3 per cent in 2022. Specifically, fabric imports from China comprised 63.9 per cent of total fabric imports, textile, garment, and leather materials 51.5 per cent, and yarn 60.8 per cent.

Imports of various other products and materials experienced year-on-year declines, especially categories such as phones and components, which saw a substantial fall of 58.6 per cent to around $8.75 billion. Similarly, the import of machinery, equipment, tools, and spare parts amounted to nearly $41.6 billion, down 7.9 per cent and representing 12.7 per cent of Vietnam’s total import turnover. Its steel imports totaled 13.3 million tons, worth over $10.4 billion, for a 14.1 per cent increase in quantity but a 12.5 per cent decline in value.

Meanwhile, imports of wood and wooden products saw a significant downwards trend, totaling $2.17 billion, 28.3 per cent lower than in 2022. Falls in imports from key markets such as China, the US, Thailand, and Laos, among others, ranged from 14.9 to 32.4 per cent, with those from other markets like Chile, Brazil, Germany, New Zealand, Russia, and the Democratic Republic of the Congo experiencing substantial declines. There was, however, a slight uptick in import turnover from France, totaling over $99 million, up 1.1 per cent.

Total imports of categories such as machinery, equipment, tools, and spare parts were just under $41.6 billion, down 7.9 per cent compared to 2022. Meanwhile, plastic product imports reached $7.5 billion, down 7.5 per cent.

Falling import turnover can be largely attributed to the global economic headwinds, influenced strongly by political conflict and a lingering increase in global inflation, which all led to shrinking consumer spending, to the detriment of Vietnam’s export activities.