Indications of Favorable Export Trends

The recovering export market and significant increase in agricultural product prices are making substantial contributions to the economy.

Bright spots in the export landscape

In the first four months of 2024, Vietnam's merchandise imports and exports reached US$238.88 billion, marking a 15.2% year-on-year increase. Exports rose by 15% to US$123.64 billion, while imports climbed by 15.4% to US$115.24 billion. Vietnam recorded a trade surplus, particularly with major markets such as the US, the EU and Japan. The domestic economic sector experienced a trade deficit of US$8.24 billion, while the foreign investment sector achieved a trade surplus of US$16.64 billion. Notably, the trade surplus with the United States was US$29.6 billion, a 21.6% year-on-year increase, and the surplus with the EU was projected at US$11.4 billion, up 16.7%.

During this period, 20 import categories each exceeded US$1 billion in value, accounting for 78.9% of the country’s total import value, with two categories surpassing US$5 billion and representing 39.4% of the total.

Agricultural products emerged prominently, with their export and import value totaling US$11.98 billion, a 26% year-on-year increase, comprising 9.69% of the country's total export value. Significant price increases led to double-digit growth for most agricultural exports, including coffee (up 57.9%), rice (up 36.5%) and tea (up 25.5%).

Orders for wood and garment companies showed an upward trend, with many firms securing enough orders to last until the end of the second quarter and, for some, into the third quarter. Leather and footwear remained major exports, totaling US$1.96 billion in the reporting period.

Additionally, the potential recognition of Vietnam as a market economy by the US presents a positive outlook for Vietnamese exports, potentially removing trade barriers and easing burdens on exporters.

Challenges in the export market

While the export market is showing signs of recovery, it remains unstable. Exporters continue to face uncertainty due to unsatisfactory order prices. Global economic turmoil and restrained consumer spending in major markets exacerbate these challenges. Seafood businesses, in particular, are struggling to secure new orders due to low demand in the US, the EU, Japan and other regions, forcing them to operate conservatively, retain workers and await market improvement.

Pangasius exports to the EU have seen a continuous decline, with the value reaching only US$47 million by mid-April, a 13% year-on-year decrease. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), businesses must focus on meeting green standards to increase their export value in this market.

Additionally, businesses face various trade barriers, including the extended producer responsibility (EPR) mechanism and the carbon border adjustment mechanism (CBAM) impacting the wood industry, as well as regulations on ecological products, supply chain traceability, and carbon emission reduction requirements in the EU market affecting the leather and footwear industry.

Vietnam's shrimp industry is also challenged by uncertainty regarding anti-subsidy tariffs in the US market, with the average export price of shrimp remaining lower compared to the past two years.

The recent volatility of the USD/VND exchange rate has presented both advantages and challenges for Vietnam's exports. While exporters may benefit from higher revenue when exchanging USD to VND, boosting profitability and competitiveness, companies that rely heavily on imported materials face increased input costs due to higher exchange rates. Additionally, higher exchange rates can make imported goods cheaper, increasing competitive pressures on domestic exporters.

To bolster exports, the Government and central agencies must continue to implement measures to open markets, develop product sources, improve quality, and meet rules of origin requirements. Businesses should capitalize on opportunities from free trade agreements (FTAs), innovate trade promotion activities, and adopt digital transformation strategies to enhance their export capabilities.

By Huong Ly, Vietnam Business Forum