Vietnam’s economy is facing a tumultuous period marked by a decline in exports and investment, casting doubts on the nation’s growth prospects. The first quarter of 2023 witnessed a significant drop in exports, plunging by 11.9% year-on-year. Distressingly, the decline deepened in April, with exports falling by 17.1% compared to the previous year. This downward trend in exports has triggered a substantial slowdown in Vietnam’s GDP growth rate, which registered a mere 3.32% in the first quarter, falling far short of the anticipated 4.8%. This figure stands as the second-lowest first-quarter data in the past twelve years.
The export situation in April exacerbated Vietnam’s economic woes. Exports plummeted by 17.1% year-on-year to reach USD 27.5 billion, while imports experienced a parallel decline of 20.5% year-on-year, amounting to USD 26 billion. During the January-April period, exports declined by 11.8% year-on-year to USD 108.6 billion, with imports also dropping by 15.4% to USD 102.2 billion. Industries heavily reliant on exports, such as textiles and footwear, suffered severe setbacks, with orders plummeting by 70%-80%. The electronics sector also witnessed a 10.9% decline in shipments compared to the previous year.
Vietnam had celebrated its achievement of exceeding USD 400 billion in GDP for the first time in 2022, accompanied by an annual growth rate of 8.02%, the highest in twelve years. Nevertheless, the current economic landscape is posing intricate challenges, potentially hampering further growth. The Vietnamese government’s initial target of 6.5% annual GDP growth seems increasingly unattainable given the mounting complexities.
Vietnam heavily relies on its export-oriented economy, particularly as one of the world’s major exporters of clothing, footwear, furniture, and electronic products. Regrettably, the harsh global economic climate has taken its toll, causing a substantial reduction in export orders for textiles and electronics. Year-on-year, Vietnam’s electronic product exports have declined by 10.9%, while textiles have suffered an even more significant blow, experiencing a 16.6% decrease.
Furthermore, Vietnam’s real estate market has been disrupted by anti-corruption measures, triggering a liquidity crisis among Vietnamese real estate companies. As a result, the entire industry has been severely impacted, with Vietnamese real estate firms witnessing a rapid surge in short-term debt ratios, reaching 21%, the highest in Southeast Asia. The repercussions of this crisis have rippled through the industry’s supply chain, leading to a decline in Vietnam’s industrial GDP. The industrial production GDP registered a 0.4% year-on-year decline in the first quarter of 2023, making it the only industry among the three major sectors to experience negative growth.
The decline in investment is another factor contributing to Vietnam’s economic setback. South Korean companies, for instance, reduced their investment in Vietnam by a staggering 70.4% year-on-year in the first quarter of 2023, totaling a mere USD 474 million. This substantial decrease indicates a growing inclination among international capital to withdraw from the Vietnamese market. Overseas investors as a whole reduced their total investment in Vietnam by a significant 38.8% year-on-year, amounting to USD 5.45 billion during the same period.
Vietnam finds itself confronted with a myriad of challenges that are hindering its economic development. The combination of declining exports, weak investment, and a real estate crisis triggered by anti-corruption efforts has created a complex web of obstacles for the country to overcome. The repercussions of these factors, including the decline in industrial production GDP and dwindling international investment, may continue to drag Vietnam’s economy down in the coming months.