The domestic economy is expected to see a climb in import turnover, but a slowdown in export turnover in 2019, as global demand is forecast to see a go-slow caused by a wide range of reasons.

According to the Party Central Economic Commission, though Vietnam last year enjoyed a high trade surplus of US$7.21 billion and an impressive economic growth rate of 7.08 %, the country may witness a much lower trade surplus and even suffer from a trade deficit this year.

“The economy’s trade balance continued its trade surplus trend in 2018, but the scale of the surplus has remarkably decreased as compared to the years 2016 and 2017,” stated a recently released commission book on Vietnam’s economic performance in 2019.

The General Statistics Office (GSO) reported that, the trade surplus has reduced remarkably month-on-month from June 2018.

Specifically, after reaching US$439 million in June 2018, the figure fell to minus US$635 million in July, and then minus US$100 million in August.

Notably, after ascending to a surplus of US$1.612 billion in September, it quickly dropped to US$770 million in October, then US$147 million in November, plunged to a minus figure of US$811 million in December, roughly US$800 million in January 2019, and US$900 million in February 2019.

In the first two months of this year, the total trade deficit is estimated to hit US$84 million.

However, “The economy’s GDP is forecast to stay at a high level this year, and this will lead to a strong climb in imports. Meanwhile, exports are forecast to suffer from a slowdown,” the book said.

Earlier, the National Assembly set the target that Vietnam’s GDP will grow 6.6-6.8% in 2019, with a trade deficit of below 3% of the total export turnover. Total export turnover will expand 7-8% on-year.

However, recently Party General Secretary and President Nguyen Phu Trong ordered that the GDP for 2019 has to be higher than 7.08% in 2018.

The Ministry of Planning and Investment has released two scenarios for economic growth this year.

Under the first scenario, the economy will grow 6.58% in the first quarter, 6.77% in the second quarter, 7.13% in the third quarter, and 6.7% in the fourth quarter. The growth rate for the whole year will be 6.8%.

Under the second quarter, the economy will grow 6.58, 6.55, 6.89, and 6.4%, respectively, in the four quarters. The growth rate for the whole of 2019 will be 6.6%.

At present, the economy’s exports depend on the performance of its four key partners including the US, China, Japan and the Euro zone. Meanwhile, these partners have and will continue suffering from a go-slow in economic growth in tandem with the slowdown of the global economy in the future, according to the Party Central Economic Commission.

Besides, there has been no signal of a stoppage in the on-going US-China trade war, which undermines global trade and economic growth.

Furthermore, the commission said the pressure for Vietnam’s trade balance this year will also come from the appreciation of the US dollar against other currencies (the US dollar’s value increased 5.75% in 2018), while the Vietnamese dong depreciated by 2.11% against the US dollar in 2018.

“Thus the locally-owned economic sector is expected to suffer from a bigger trade deficit, which will not be able to be wholly offset by the trade surplus of the foreign-owned economic sector,” the commission’s book stressed. “Thus there will probably be a trade surplus in 2019.”

Last year, the economy reaped a high trade surplus of US$7.21 billion despite the US-China war dampening global demand.

Notably, over the past months, while the US and China, which are the largest export markets of Vietnam, have been engaging in duelling import tariff impositions, Vietnam’s exports to these markets remain on an uptrend.

Specifically, total export turnover from the US, which is the largest purchaser, was US$47.5 billion, up 14.2% on-year, and that from China, which is the third largest buyer, totalled US$41.9 billion, up 18.5% on-year.

“Given the recent trade war between China and the US, alongside Vietnam’s recent ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the signing of the EU-Vietnam FTA, the country is steadily becoming more open to international trade and investment,” commented Kyssha Mah, an analyst from pan-Asia consulting firm Dezan Shira & Associates.

According to Mah, located in a strategic position for foreign companies with operations throughout Southeast Asia, Vietnam is an ideal export hub to reach other ASEAN markets.

Compared with other developing markets in the region, Vietnam is emerging as the clear leader in low-cost manufacturing and sourcing, with the country’s manufacturing sector accounting for 25% of Vietnam’s total GDP.

At present, labour costs in Vietnam are 50% of those in China and about 40% of those reported in Thailand and the Philippines. With Vietnam’s workforce growing annually, local workers are inexpensive, young, and, increasingly, highly skilled.

Nhan Dan