After undergoing one of the toughest Covid-19 lockdowns in the world during 2021, Vietnam’s economy appears to be headed toward a full recovery, according to an analysis of first-half 2022 imports and exports by Trade Data Monitor, the world’s premier source of trade statistics.
Vietnamese imports increased 15.5% year-on-year to $185.3 billion during the first six months of 2022. Meanwhile, exports rose 17.3% to $186 billion, preserving Vietnam’s slight trade surplus. To boot, in the first six months, foreign direct investment into the country increased 9% to $10.1 billion. Gross domestic product is expected to approach 7% growth after increasing only 2.6% in 2021.
The challenge for Vietnam will be to hold on to the consumer markets it’s conquered in the European Union and the U.S. as it cements its place in new Asian industrial supply chains.
During the first six months of 2022, exports to the EU rose 22.3% to $24.1 billion, exports to ASEAN countries rose 26.9% to $17.7 billion, and exports to the U.S. increased 24.1% to $56.6 billion.
However, Vietnam isn’t buying as much in return, increasing the risk that it could fall prey to the same protectionist forces that have bedeviled China in the last decade. Imports from the U.S. fell 2.4% to $7.5 billion, and imports from the EU shrank 4.3% to $8.1 billion. Meanwhile, imports from ASEAN nations increased 14.8% to $24.4 billion. And imports from China rose 14.6% to $61.1 billion.
Vietnam’s exporting manufacturing sector in 2022 will benefit “from steady demand from the United States, the European Union, and China,” the World Bank wrote in a recent report.
Vietnam’s total trade, remarkably, is twice that of GDP. The new Regional Comprehensive Economic Partnership, or RCEP, is expected to boost exports. It will cut tariffs and ease trade among countries including Vietnam, China, Japan, South Korea, Australia and New Zealand. Low labor costs, stable exchange rates and prodigious foreign investment from multinational companies have turned Vietnam into a shining star.
Increasingly, Vietnam’s export machine has been focused on its high-tech sector. Exports of mobile phones and associated parts rose 16.4% to $29.2 billion, in the first six months of 2022, while shipments of computers and parts rose 15.6% to $27.6 billion.
As economies transition up the value chain, their manufacture and exports of more elemental products typically drop off. That’s not been the case in Vietnam. Exports of footwear rose 13.5% to $11.8 billion over the first six months of 2022, while textile and garment shipments increased 20.8% to $18.5 billion.
And Vietnam also still has a vibrant agriculture and food sector. Exports of coffee rose 48.5% to $2.3 billion during the first six months of 2022. The composition of exports is changing. Shipments of fruits and vegetables declined 17.1% to $1.7 billion.
On the import side, Vietnam’s largest trading partner was China, with which it forms a tight network of supply chains comparable to the U.S. and Canada. Shipments of computers and parts from China rose 29.3% to $12.5 billion. However, imports of machines and equipment fell 0.1% to $11.9 billion, and imports of mobile phones and parts also fell 0.1%, to $4.2 billion. This suggests that Vietnam is becoming more self-sufficient.
It still needs prodigious quantities of raw materials to feed its factories. Iron and steel imports increased 10.4% in June to 1.2 million tons. As prices increased, steel imports by value rose 20.8% to $1.4 billion.
There are signs, however, that industrial activity might be waning. Vietnam cut coal imports 15.1% to 16.8 million tons in the first six months. Price inflation, which is detectible in trade statistics, boosted imports by value 135.8% to $4.3 billion.
Another challenge for Vietnam will be maintaining purchasing power for its citizens. Motor vehicles imports fell 21.4% in the first six months of 2022 to 63,731. By value, they declined 14.4% to $1.6 billion.