MOIT VIETNAM | Maintaining Export Momentum in 2023
Maintaining Export Momentum in 2023
Vietnam exports are becoming a cornerstone of the Vietnamese economy. Nevertheless, our nation's exports have been steadily falling during the last four months of 2022, a problem that will only worsen in 2023 due to a mixture of objective and subjective causes.
The COVID-19 pandemic has far-reaching consequences for society and the economy in particular, in addition to becoming a global health emergency. Despite Vietnam's strong recovery from the epidemic, the devastating impact of the COVID-19 problem is still felt today. A global economic downturn that began at the tail end of 2022 and is predicted to last into 2023 has a significant impact on the Vietnamese economy.
The world is currently facing a number of concerning issues. Firstly, there is a sharp decline in purchasing power due to rising inflation. Secondly, in order to combat this, the US Federal Reserve and the European Central Bank are constantly raising interest rates. Furthermore, food and energy scarcity is a result of the protracted conflict between Russia and Ukraine, which is affecting Europe the most. In addition, there are numerous political regions that still have unresolved issues that could lead to tension and opposition, such as issues involving North Korea, Russia, and Taiwan. Moreover, there is a high risk of COVID-19 outbreaks, and response measures are unable to be implemented in a timely manner. Lastly, a severe drop in commerce may occur if Europe's economy were to enter a recession.
With a decline of 3.9% from October 2022 and an overall decline of 8.4% from the same month in the previous year, Vietnam's export turnover for November 2022 came to 29.18 billion USD.
Our nation's trade surplus is 10.6 billion USD by the end of the first eleven months of 2022, with the FDI sector accounting for 38.57 billion USD of that total. Local exports, on the other hand, fell sharply to 27.97 billion USD.
As a result of the global inflation environment and declining purchasing power, important export orders for our country's footwear, cashew nuts, iron and steel, textiles and garments, etc., have decreased significantly. We could witness the continuation of this recession in 2023. It is also expected that non-essential commodities, such as wooden furniture, would see a decline in both quantity and order value when transported to Europe.
Reduced demand for exports is the primary factor causing the labor utilization index to fall sharply. According to data released by the General Statistics Office (GSO), the labor utilization index declined 5.86% from the same period last year as of November 1, 2022, across all occupations, with the manufacturing and processing industries seeing the most significant decline.
Due to the ongoing confrontation between Russia and Ukraine, the future of international oil pricing is going to be complicated and unpredictable. Nations' monetary policies and economic operations, notably Vietnam's, are very vulnerable to swings in oil prices. Our country must see this as a critical signal and respond accordingly.
Vietnamese banks could consider implementing tactics to mitigate the impact of inflation, such as increasing interest rates, restricting lending, and seizing properties with limited liquidity. This problem causes a scarcity of capital for export businesses, as no one is willing to lend them money at the ridiculously high interest rates. The COVID-19 epidemic reduces purchasing power and causes overstock, which in turn causes domestic export enterprises to face a decline in income, capital stagnation, and mobile cash flow issues. The risks involved with corporate bonds are also causing investors to lose trust in the market, as stated before. This causes a dramatic decline in the short-, medium-, and long-term effectiveness of the bond capital mobilization channel.
Some industries are more likely to be able to weather these storms and keep growing than others. These include those that export necessities that people need every day, such as coffee, pepper, seafood, etc. However, exports from several non-essential businesses, such as those dealing with iron, steel, lumber, etc., are expected to decline.
Exports from Vietnam in 2023 will encounter several obstacles, but there will also be possibilities and signs of optimism. The outlook for our country's exports to some major markets, including the EU, is usually seen as favorable.
Agricultural goods, textiles, leather, machinery, and electrical equipment are just a few examples of the many Vietnamese imports that are seeing a surge in demand in the European Union. Secondly, most tariffs will be reduced to zero under the EVFTA agreement, which opens up tremendous chances for export prospects to the EU.
Vietnamese businesses can lessen their reliance on a small number of client partners in trade and commerce by expanding their network of partners. To be more competitive both at home and abroad, companies must also work to enhance their own skills.
Here are a few constructive steps the government may take in 2023 to keep things stable and speed up exports:
The first step is to establish a favorable business climate and to continuously enhance it. Reforming administrative procedures, combating corruption and bureaucracy, and expanding incentive measures to attract foreign investors are all areas where Vietnam has achieved significant progress in recent years.
Second, make the most of the benefits of free trade agreements to their fullest extent while also constructing a long-term market economy.
Third, keep a careful eye on market swings, stick to sound fiscal and monetary policies, and rein down the national debt.
The fourth piece of advice is to help companies weather tough times by providing them with the financing they need to get back on their feet as soon as possible.
Fifth, the Vietnamese government should enact laws that inspire businesses to think outside the box, be inventive, and adapt quickly to the ever-changing conditions of the Vietnamese economy.
It is clear from looking at the short term that there are a lot of reasons that will make 2023 a tough year for the economy. Nonetheless, there is reason to be hopeful about Vietnam's economic growth in the next few years. The Vietnamese government's commitment to building free trade, investment protection policies, and deep integration into the market economy and international value chains, along with the country's strong finances and careful fiscal and monetary policies put in place by the State Bank, are strong reasons to be optimistic.
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