According to VinaCapital’s Michael Kokalari, in 2023, the most serious impact on Vietnam’s GDP has been the decrease in demand for made-in-Vietnam products.

Vietnam has experienced the longest decline in exports in the last decade, which decreased the domestic production by 1 percent in the first seven months 2023. 

This was because most of the products made in Vietnam are exported. There are many signs showing export recovery in the last quarter of the year.

VinaCapital predicted that Vietnam’s export activities would fully recover by 2024, which will allow production to regain the high growth rate of 8-9 percent. This will help the GDP recover from below 5 percent in 2023 as predicted by VinaCapital to 6.5 percent in 2024.

Meanwhile, the measures initiated by the government to support the economy, including operating interest rate cuts, will also contribute to GDP growth the next year.

A high number of Vietnamese enterprises operate based on exports. The institution believes that export recovery will lead to an increase in profits of listed companies from 6 percent in 2023 to 20 percent in 2024. The factor will support the VN Index in the following months.

According to VinaCapital, the US is the largest export market of Vietnam. It buys one-fourth of Vietnam’s total exports. Retailers and consumer goods companies in the US such as Nike and Lululemon ordered too many made-in-Vietnam or made in Asia products last year as they hoped for economic recovery after Covid-19. But this has not occurred.

After the measures to fight Covid-19 were removed, instead of buying more consumer goods, Americans prioritized spending more money on services, including tourism and dining.

The situation became even gloomier when these companies placed big orders with factories in Asia to deal with problems in supply chains and goods shortages. As a result, the inventory levels of many companies, including Walmart, Target and Nike, increased by 20 percent by of the end of 2022 compared with the same period in the previous year.

US economy recovers

To clear big stocks, multinationals cut orders with Vietnamese factories, resulting in lowering Vietnam’s exports to the US by 20 percent in the first seven months of 2023 compared with the same period last year.

However, American companies have been making efforts to reduce inventories over many months. The ISM inventory index fell to a 9-year low in June and then slightly increased in July.

The inventories of retailers in the US increased by 5 percent over the same period last year, but the inventories of made-in-Vietnam products (household electronics and garments) were unchanged.

All these factors have a close relation with Vietnam’s export figures. The US companies’ efforts to clear stocks caused Vietnam’s exports to drop sharply in the first half of the year. However, this is coming to an end, and Vietnam’s exports to the US increased again last July (+ 7 percent) over the month before.

The improvement in exports to the US helped Vietnam’s total export value recover, from a 12 percent decrease in the first half of 2023 compared to the first half of 2022, to a 2 percent decrease in July.

According to VinaCapital, Vietnam also benefits from multinational corporations’ relocation of their production from China to Vietnam. This explains why Vietnam’s exports decreased by 2 percent only in July, compared to 15 percent of China, 16 percent of Korea and 10 percent of Taiwan (China).

All exporters in Asia have benefited from the bottoming of the inventory cycle of the US and but Vietnam is the only country in Asia that has benefited significantly from the establishment of new foreign-invested factories. Meanwhile, FDI (foreign direct investment) in China hit a record low in the second quarter of 2023.

VinaCapital believed in the improvement of Vietnam’s export in the time to come. Vietnam’s PMI (Purchasing Managers Index) increased from 46.2 points in June to 48.7 points in July. This shows that enterprises began buying input materials to step up production as they hoped in the recovery of orders later this year.

Manh Ha