Vietnam’s exports forecast to increase by 10%, says HSBC

Vietnam's exports would likely to grow by over 10% between 2021 and 2030, making a slight change from previous five years, a HSBC report revealed.

The trade forecast report said that inflows of foreign direct investment have been very strong in recent years, helping the country diversify its export base and gradually move into higher value sectors, most notably ICT equipment, which now accounts for around 25% of its exports, up from less than 10% seen five years ago.

But at the same time, the large, young, and increasingly skilled workforce continued to attract manufacturers of low-cost items such as clothing and apparel to Vietnam. Rapid liberalization should greatly benefit Viet Nam's trade with the rest of Asia, the US, and Europe, and underpin expansion into new markets.

Vietnam was one of the 12 countries in the Trans-Pacific Partnership (TPP), which reached a preliminary agreement in October. In August, Vietnam also reached an agreement in principle for a free trade agreement with the EU. It was also speeding up preparation for the launch of the ASEAN Economic Community (AEC) on December 31.

According to the report, information, communication and technology (ICT) equipment was now the Vietnam’s biggest export sector and the success the economy has had in diversifying its export base in recent years was best illustrated by the share of ICT equipment in total exports, which has risen to around a quarter from less than 10% as recently as five years ago.

It predicted that ICT equipment might contribute 19% of the total increase in exports between 2021 and 2030, higher than 14% recorded in 2015-20 period.

Samsung, which firstly opened a mobile phone plant in Vietnam in 2009, has led this increase. Its first plant doubled its output each year, while another factory was built in 2013 and plans were announced for two more factories a year later: a US$600 million facility to manufacture household appliances and a US$3 billion smart phone plant.

LG, Microsoft, and Intel also had plans to expand operations in Vietnam.

Meanwhile, it said, the large, growing low-cost workforce and the progress towards the TPP agreement and the ASEAN single market meant Vietnam would continue to attract low cost manufacturing firms and maintain its strong position in the textile and garment market.

Clothing and apparel would contribute 19% in 2021-30 while textiles and wood products would account for 10%, the report forecast.

Vietnam's geographic location between India, China, and Southeast Asia left it well-placed to trade with its fast-growing neighbors. Largest trade partners of Vietnam would include China, Japan, South Korea, USA, EU, UEA.
Import outlook

The report expected that industrial machinery would contribute around a quarter of the increase in imports in 2021-2030, a slight change from 2015-2020.

ICT equipment would account for around 10% of the increase in 2021-30 thanks to the strong presence of Vietnam in the global telecom sector and more broadly the gradual technical upgrading of the economy.

At the same time, textiles and wood products and clothing and apparel would account for close to 20% of the increase in imports, reflecting both intermediate demand from the domestic sector and final demand from the buoyant consumer market.

China was the Vietnam's biggest import partner (of the 24 trade partners in the HSBC Trade Forecast) and with imports from China growing by 15% in 2021-2030. It would be followed by South Korea, India, Singapore and Japan.

Trade deficit of $3.8b in 11 months

Vietnam's trade deficit decreased to US$3.8 billion over the past 11 months, from the US$4.1 billion recorded for the past 10 months, according to the General Statistics Office (GSO).

The reduction was attributable to an US$18.8 billion trade surplus reached by the foreign-invested sector, GSO noted.

During the reviewed period, the country reaped US$148.71 billion from exports, a year-on-year rise of 8.3%. Of the total, the foreign-invested companies contributed to US$105.10 billion, up 13.5% while domestic enterprises accounted for US$43.6 billion, a yearly decline of 2.1%.

The foreign-invested sector posted high turnover for most of its major exports including   telephones and components with US$28.5 billion, up 29.6%; computers, electronic products and components (US$14.3 billion, up 38.2%); garment and textile products (US$20.7 billion, up 9.1%); machinery and equipment reached (US$7.4 billion, up 11.2%) and wooden goods (US$6.2 billion, up 9.5%).

Oppositely, the domestic sector witnessed reduction in its key exports such as crude oil with dropping by 48.3% equivalent to US$3.53 billion; rice (down 48.3% equivalent to US$2.66 billion), coffee (down 29.3% to US$2.34 billion) and rubber (down 14.2% to US$1.38 billion).

From January to November, the nation imported US$152.5 billion worth of goods, surging 13.7% against the same period last year. Of the sum, US$62.3 billion came from local businesses, a year-on-year rise of 8%, while the remainder from foreign-invested firms, up 18.1%.

Among the major imports included machinery and equipment with turnover of US$25.3 billion; computer, electronic products and components (US$21.6 billion); telephones and components, (US$10.1 billion); cloth (US$9.3 billion) in addition to automobile (US$5.3 billion) and garment, textile and footwear materials (US$4.6 billion).

The General Statistics Office forecasts that the country's trade deficit would expand next month as exports of crude oil and farm produce would likely to continue to decrease. However, it hoped that the deficit this year would be controlled at less than 5% of all export revenues as target set.