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Impact of Russia-Ukraine conflict on Vietnam's economy

As a country with high economic openness, deeply integrated into the global economy, Vietnam cannot avoid the impact of the Russia-Ukraine conflict.

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Experts said that Vietnam will be significantly affected by market fluctuations in economic and trade cooperation as well as import and export of goods.

Some direct impacts include inflation, circulation of goods, and payment of commercial contracts.

Local firms with cooperation projects with partners in Russia, Ukraine, Belarus and other countries involved in the crisis will also be affected.

According to the European-American Market Department of the Ministry of Industry and Trade, both Russia and Ukraine are traditional and important trading partners of Vietnam in the Asia-Europe region; in terms of trade turnover, Russia ranks 1st and Ukraine 6th.

Bilateral trade turnover between Vietnam and Russia in 2021 reached 5.5 billion USD, up 13.8% compared to 2020. Of which, exports reached 3.2 billion USD, up 13.2%, and imports at 2.3 billion USD, up 14.9%.

Vietnam's main exports to Russia include phones and components (accounting for 33%), computers and electronic products (13%), textiles (10.5%), coffee (5.4%), and seafood (5.1%).

Vietnam-Ukraine trade turnover in 2021 was estimated at 720.5 million USD (up 50.6% compared to 2020). Vietnam’s export revenue from Ukraine last year was 344.6 million USD (up 21 %), and import turnover 375.8 million USD (up 94.2).

The main export items of Vietnam to this market include phones and components (49%), seafood (8.3%), machinery, equipment and spare parts (5.4%), footwear (4.87%), and computers and electronic products (4.84%).

If the Russia-Ukraine conflict continues, it will have a serious impact on bilateral trade between Vietnam and the two countries.

In the short term, the crisis will affect goods, supply and demand and prices. This conflict is one of the main reasons for increasing prices of a number of fuels and raw materials for production and consumption such as gas - petroleum, wheat, aluminum, nickel, corn...

Regarding the payment of commercial contracts, for Russia, the US and Western countries have imposed a series of sanctions targeting the banking - financial system of Russia, which will affect the settlement of many contracts using the US dollar as payment currency. In addition, as the ruble exchange rate has fluctuated, some Russian importers have proposed suspending payment for 2-3 weeks to wait for the situation to stabilize.

Regarding transport and circulation of goods, some shipping lines have refused to accept orders to transport goods from Vietnam to Russia. Freight rates will continue to soar along with shipping delays that will severely affect trade in goods.

In addition, due to an air embargo, airlines will have to choose longer routes, causing increased costs and pressure on the global logistics transport system and the price of goods.

Experts said that it is too early to assess the medium and long-term impacts of the Russia-Ukraine crisis on trade relations with Vietnam.

If the US and the West increase the enforcement of the harshest sanctions, along with the recovery of the global economy as a result of the Covid-19 pandemic, some analysts have forecast a bad scenario for the Russian economy in 2022 with GDP down 7-10%, inflation up to 14-16%, Ruble exchange rate will be at 110 - 110 Rubles/USD, the purchasing power will decrease sharply …

Accordingly, bilateral trade between Russia and countries in the world in general and with Vietnam in particular will be affected.

As for Ukraine, the economy will be more difficult and will need more time to recover, so the two-way trade turnover between the two countries will also be negatively affected.

Hoang Viet

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