New normal adaptation
By Nguyen Dinh Bich
|Overall, compared with the year-earlier period, although export sales reached US$48.7 billion, a three-fold increase (24.7% versus 8.7%), import value soared to US$47.1 billion, a jump of 9.5 times (26.4% versus 2.8%) – PHOTO: ANH QUAN|
The new year has entered its second quarter and clear signs have been seen of a rapidly changing world market. In such a context, the Vietnamese economy, which has a high degree of openness despite its low economic development, has been strongly affected by import-export in an unprecedented way. How to cope with these fluctuations should therefore be taken into account.
Globally speaking, statistics obtained from the World Bank show that compared with the end of last year, the world power price climbed unexpectedly by 25.9% in February, Likewise, prices of non-fuel commodities rose by 7.1%, of which the price of farm produce rose by 6.4% (prices of cereals soared by 15%, prices of metals by 6.9% and prices of fertilizers by 26.9%, a record high). These hikes were very remarkable against 2020.
Given such conditions, Vietnam with her special basket of imports and exports will benefit significantly from exports. What’s more, she will suffer significantly from import activities, too.
Calculations from statistics released by the Vietnamese customs authorities over the past two months show that while Vietnam enjoyed US$285 million from her exports worth US$4.9 billion from 16 commodities with recorded quantities and value, she lost US$730 million in importing 18 commodities from the world market. That means Vietnam suffered a net loss of US$445 million, or 3% of the total import-export revenue of these groups of commodities. This is a completely reversing scenario from the year-ago period when Vietnam enjoyed significant net gains in exporting and importing these commodities.
A closer look shows that although during the past two months, export sales soared by 17.3% (US$4.9 billion versus US$4.2 billion), the increase would be only 10.5% (US$4.6 billion versus US$4.2 billion). Similarly, the import value of these commodities rose even higher, at 20.6% (US$9.98 billion versus US$8.3 billion). However, if adjusted to the price in the same period last year, the hike would be only 11.8% (US$9.25 billion versus US$8.3 billion).
What the above figures may indicate is world prices have contributed significantly to the amplification of Vietnam’s both import and export baskets.
Overall, compared with the year-earlier period, although export sales reached US$48.7 billion, a three-fold increase (24.7% versus 8.7%), import value soared to US$47.1 billion, a jump of 9.5 times (26.4% versus 2.8%).
It is this reason that Vietnam’s trade surplus has come down, absolutely and relatively, from US$1.82 billion in the year-ago period to US$1.64 billion now with the corresponding rate of 4.9% and 3.5%, respectively.
From all the above facts, the following conclusions can be drawn.
First, if the world prices continue their current trend in the coming months, Vietnam’s exports will rise. However, imports will outpace exports and trade surplus will decline. The possibility of a trade deficit cannot be ruled out in this context.
Second, all the above fluctuations will play a significant role in warming up the domestic market, which may prolong. The recent inflationary hike may be only the start of the process.
Two hidden corners
Aside from the above external affects, import-export fluctuations may come from the resonance of the following subjective factors.
First, although the new FTAs (Free Trade Agreements) have received heaps of praises, Vietnam’s import-export market still follows the same beaten track, if not worse.
Of the six markets which are Vietnam’s key foreign trade partners and are signatories in the new-generation FTAs, Vietnam saw the ratio of her total export sales to five of them—including China, Japan, South Korea, ASEAN and EU – 28 (EU plus Britain)—drop to 51.7% from 54.7% in the same period last year while the total import value from these markets rose from 71.9% to 74.5% year-on-year.
The only bright spot in this regard related to the Chinese market when the export ratio jumped from 14% to 16.4% year-on-year. However, this market was also the “darkest spot” when the ratio of imports soared from 24.9% to 32.7%.
Meanwhile, the ratio of export to the United States, Vietnam’s only key trading partner not to be governed by an FTA, also surged equally remarkably, from 26.3% to 28.4%. However, the ratio of import value from this market plummeted from 5.9% to 4.8%.
These wide fluctuations led to the fact that while Vietnam’s trade deficit with China was reinstated, trade surplus with the U.S. skyrocketed to a new record at US$11.6%.
Second, as far as groups of imports are concerned, agricultural-forestry-fishery commodities surged to US$4.25 billion posting a growth rate of 42.1% while their export value reached only US$6.27 billion and their growth rate was only a half, at 20.3%.
The import value of manufactured and processed commodities also rose to US$8.3 billion at a growth rate of 28.2%, slightly lower than export sales in this sector which were US$8.4 billion and posted a growth rate of 26.8%.
In this industry, there were two influential factors: imports from ASEAN climbed 1.88 times and China 1.77 times.
Of the group of manufactured and processed commodities, the relations between import from China and export to other markets were so clear. Imports from China over the past two months surged to US$5.83 billion (posting a growth rate of 69.8%). Meanwhile, exports of this group of commodities to the U.S. escalated to US$2.73 billion (63.9%); to other markets (excluding the six key markets) to US$2.36 billion (35.9%); and to EU – 28 to over US$1 billion (22.5%).
The most typical among this group of commodities was imports of machinery, equipment and other spare parts from China, which rose from US$1.98 billion to US$3.36 billion (ratio rising from 38% to 49.4%). Meanwhile, exports of the same commodities stateside rose from US$952 million to US$2.73 billion (from 30.4% to 48.8%).
To cut a long story short, although a strong rise in export should be encouraging, import also climbed sharply during the period, resulting in a shrinking trade surplus. Aside from fluctuating world prices, which are a force majeure, the possible reason was that the new-generation FTAs still failed to work effectively to boost export and restrict import. Consequently, only the U.S. market accounted for 36.9% of the hike of exports and only the Chinese market accounted for 62.2% of imports.
All considered, the relations between exports to the U.S. and imports from China should be a question policymakers have to solve to make Vietnam adaptive to the new normal in the making.