Vietnam expected to resume rapid growth over medium-term: S&P Global

The country’s gross domestic product (GDP) growth rate fell to 3.7 per cent year on year (YoY) in the first half this year after a rapid growth of 8 per cent YoY last year. Goods exports fell by 12.3 per cent YoY in the first five months this year.

Rising headwinds were faced by the country’s manufacturing export sector due to slowing growth in the United States and the European Union (EU), its two key export markets accounting for over two-fifths of its goods exports.

The S&P Global Vietnam manufacturing purchasing managers' index (PMI) posted below the 50 no-change mark for the fourth month running in June, signalling a sustained deterioration in the health of the sector.

Although rising to 46.2 in June, up from 45.3 in May, the latest reading still pointed to continued contractionary operating conditions for Vietnam's manufacturing sector, S&P Global noted in a release.

Severe power outages have added to the near-term challenges facing the country’s manufacturing sector. Manufacturing production in industrial parks in northern regions of Vietnam have been particularly badly impacted, notably in Bac Ninh and Bac Giang provinces.

The pace of GDP growth in the second quarter this year was 4.1 per cent YoY compared with 3.3 per cent YoY recorded in the first.

In the first five months this year, merchandise exports to the United States fell by 21.3 per cent YoY. Exports of textiles and garments to that country fell by 27.1 per cent YoY.

Exports to the EU were also weak, declining by 9.7 per cent YoY during the same period. Exports of textiles and garments to the EU fell by 6.2 per cent YoY.

Exports to mainland China declined by 6.7 per cent YoY during the five-mopnth period—significantly better than the 12.9 per cent YoY decline recorded in the first four months.

Industrial production contracted by 1.2 per cent YoY in the first six months this year compared with a strong positive growth of 8.5 per cent YoY in the first six months of 2022. Vietnam's industrial production rose by 7.8 per cent YoY in 2022, with manufacturing output up by 8 per cent YoY.

New export orders decreased more quickly than total new business amid declining demand in international markets. Demand weakness fed through to a further reduction in manufacturing production, while there were also a number of reports that power outages due to the heatwave in Vietnam had restricted output, the PMI survey results showed.

The consumer price index-based inflation rate moderated to 2 per cent YoY in June this year compared with 3.4 per cent YoY in March and 4.3 per cent YoY in February. Core CPI inflation was higher, rising by 4.3 per cent YoY in June and was up by 4.7 per cent YoY for the first six months this year.

Fibre2Fashion News Desk (DS)