What can we learn from the $21.7 billion trade surplus?

Forecasts indicate that the trade surplus will continue to increase in the remaining months of the year; however, in the long term, there will be many difficulties and uncertainties, requiring businesses to proactively transform towards a green and circular economy .

Market diversification success

According to a report by the Ministry of Industry and Trade , generally, all sectors faced difficulties in export markets due to a decrease in global demand, especially for non-essential consumer goods. Consequently, Vietnam's export turnover to most key markets decreased in the first nine months of 2023; total turnover is estimated at US$259.67 billion, down 8.2% compared to the same period last year. Conversely, import turnover is estimated at US$237.99 billion, down 13.8%. This resulted in a trade surplus of US$21.7 billion.

Vietnam's trade surplus continues to increase, but some key sectors are still facing many difficulties.

In this context, agriculture has once again become a pillar of the economy. Agricultural products have made impressive contributions to exports, especially agricultural products such as rice, fruits and vegetables, coffee, and cashews. However, the growth of these products only partially supports the overall economic picture. Exports of processed industrial goods account for nearly 85% of the country's total export turnover, estimated at 220 billion USD, continuing to decline by 9.6% compared to the same period last year. The main reason is the decline in export turnover of most items such as computers, electronic products and components, telephones and components; machinery, equipment, tools and spare parts; textiles, footwear, and wood products.

Looking at economic sectors, domestic enterprises exported nearly $69 billion, a decrease of 5.7% and accounting for only 26.5% of total export turnover; the foreign-invested sector (including crude oil) exported nearly $191 billion, a decrease of 9.1% and accounting for 73.5% of total export turnover. Conversely, the domestic economic sector imported $85 billion, a decrease of 11.8%; the foreign-invested sector imported $153 billion, a decrease of 14.9%. Thus, the domestic economic sector still had a trade deficit of $16 billion; the foreign economic sector had a trade surplus of $38 billion. The rate of decline in exports of 100% domestically owned enterprises was only 5.7%, lower than that of foreign-invested enterprises, which decreased by 9.1%.

Associate Professor Dr. Dinh Trong Thinh (Academy of Finance) analyzed: In the context of a declining global economy, closely monitoring export trends reveals a significant trade surplus for FDI enterprises right from the beginning of the year. Meanwhile, domestic businesses are experiencing a trade deficit. This indicates a considerable disparity in production and export capacity between foreign and domestic businesses. Although export turnover has decreased due to the overall situation, the achievements of FDI enterprises have made a positive and crucial contribution to the economy.

According to the Ministry of Industry and Trade, the global economy is generally facing significant difficulties, especially in Vietnam's key markets. However, businesses have made efforts to diversify their markets, focusing on exploiting new markets with significant potential. Specifically, while Vietnam's largest export market, the US, only reached nearly $71 billion in export turnover, a decrease of 16.8% compared to the same period in 2022, businesses promptly boosted exports to the second largest market, China, with an estimated turnover of over $42 billion, an increase of 2.1%. When the EU and Japanese markets faced difficulties, exports to West Asian countries increased by 4%, estimated at $5.9 billion, and the African market increased by 1.2%, especially the North African market which saw a significant increase of 9.4%...

According to a report by the Ministry of Industry and Trade: In the context of a still very difficult global economy, Vietnamese businesses, especially in agriculture, have effectively taken advantage of market opportunities to boost exports. Overall, businesses in all sectors have successfully diversified their markets. While exports to major markets such as the US and EU have decreased, they have shifted towards new markets, particularly by implementing effective solutions for exporting to neighboring countries. Notably, the Chinese market was the only major market to achieve positive growth (up 2.1%), while other major markets experienced declines.

Adapt to an uncertain market.

Essentially, a trade surplus contributes to macroeconomic stability, ensures major economic balances, and significantly supports the international balance of payments. However, in essence, Vietnam's trade surplus in recent times is due to export growth decreasing less than import growth, not because export growth has exceeded import growth.

Dr. Nguyen Huu Huan, Head of the Finance Department at the University of Economics Ho Chi Minh City, analyzed: "From the beginning of the year until now, Vietnam's trade surplus has continuously increased. Of course, this is also a positive aspect. I also believe that it will continue to increase in the remaining months of 2023 when consumer markets enter the peak shopping season. However, in the medium and long term, there will be many difficulties and challenges for Vietnamese businesses. Firstly, the global economy is still not promising, purchasing power remains weak, and according to the information I have, the world's most important market is still worried about inflation. This greatly affects their purchasing power and demand for imported goods next year. On a global level, the market has not yet recovered, especially the recent conflict between Hamas and Israel, which continues to prolong the uncertainty of the world economy. This conflict continues to disrupt previous economic forecasts and plans."

Dr. Huan continued: If we approach the issue from the perspective of a continuously volatile global economy and the fact that Vietnam's trade surplus is due to imports declining more sharply than exports, then we truly need to find solutions for recovery. A positive factor is that in recent times, many Vietnamese domestic businesses have actively shifted from using imported raw materials to domestic ones. This is something that needs to be further promoted to increase the added value of Vietnamese goods. However, this transition must also be aligned with market trends, focusing on "greening" products and moving towards a circular economy, rather than just competing on price. This is the time for businesses to restructure production, reposition products and markets to prepare for the coming years. If they fail to green their products in time, businesses may not be able to overcome the prolonged difficulties ahead.

According to Mr. Huan, to support businesses, the government also needs incentive policies and mechanisms to help businesses transform more quickly. For example, in the textile and garment industry, we are lagging behind and facing the risk of losing market share to Bangladesh. Besides that, an important factor is the exchange rate. Currently, the currencies of most countries are depreciating against the USD, while Vietnam is maintaining its currency value very well. The positive aspect is that it helps stabilize the macroeconomy, but the depreciation of other currencies while the VND remains stable against the USD is making Vietnamese goods more expensive compared to competitors. However, Vietnam is also an importer of goods for processing and export, so a more flexible exchange rate policy is needed to minimize the impact on all parties involved.

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