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Vietnam’s open economy vulnerable to upheavals

VietNamNet Bridge - Vietnam’s economy is becoming more vulnerable to world events, especially the US-China trade war.
VietNamNet Bridge - Vietnam’s economy is becoming more vulnerable to world events, especially the US-China trade war.\


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Vietnam is an open economy



2018 was a successful year for Vietnam with the trade surplus for the third consecutive year. The excess of exports over imports was record high, reaching $6.8 billion.

Imports and exports, though growing more slowly than 2017, still gained encouraging results. The total export value increased by 13.2 percent to $243.5 billion, while the import turnover increased by 11.1 percent to $236.7 billion. 

Imports and exports, though growing more slowly than 2017, still gained encouraging results. The total export value increased by 13.2 percent to $243.5 billion, while the import turnover increased by 11.1 percent to $236.7 billion. 

With the import and export turnover of $480 billion, or 196 percent of GDP, SSI Retail Research has added Vietnam to the list of economies with the highest openness in the world.

Vietnam gained big success in 2018 in its efforts to integrate globally. It contributed to the signing of CPTPP in March 2018 and made considerable progress in the EU-Vietnam FTA discussion.

However, according to SSI Retail Research, any change in the global market may have impact on Vietnam’s economy.

Vietnam, which has been integrating more deeply into the world, for example, is ‘sensitive’ to the US-China trade war which has led to a decrease in global trade.

Chinese manufacturers, which cannot export products to the US as a result of higher taxes, may try to avoid the high tax by shipping their goods to Vietnam before to the US. They will also boost exports to Vietnam as they lose the US market, and boost domestic consumption, competing with imports from Vietnam.

About influences of the trade war to Vietnam’s economy, an analyst cited statistics as showing significant increase in Vietnam’s exports from 9.4 percent in the first six months of 2018 to 13.8 percent by the end of the year.

Meanwhile, the export growth rate to China began slowing down last August and dropped to minus 6.8 percent in November compared with the same period of 2018 and to minus 19.8 percent in December.

The exports of phones dropped dramatically by 42 percent, and cameras by 17 percent, vegetables & fruit by 16 percent and woodwork 31 percent.

Nguyen Minh Cuong from ADB pointed out challenges Vietnam may face if tensions in US-China trade war escalate.

The decline in global trade will have a big impact on Vietnam, an economy that relies on exports. In addition, investors may reconsider their business strategies and withdraw capital from Vietnam.

China may also devalue the yuan, which will put pressure on Vietnam dong.

Cuong explained that an open economy can be harmed when global trade tense escalates and liquidity becomes weaker.


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