Henig at KTFA "Vietnam News" Sunday

KTFA: Vietnam

Henig:  Colours of Vietnamese economy in 2022 and 2023 outlook

January, 22/2023 – 07:36

In 2022, Việt Nam has emerged as a stronger, more resilient economy. It recovered strongly from the low “base” two years ago to shine a light in a world of challenges and uncertainties.

Võ Trí Thành*

Despite the negative impact of the COVID-19 pandemic, Việt Nam has seen an economic growth trajectory different from the general picture of the world economy over the past years.

In 2020, when the pandemic started causing devastating effects on a global scale, Việt Nam was among the few economies with positive growth (2.9 per cent) while major economies of the world witnessed a severe recession. In 2021, bucking the world’s strong recovery, the economy’s growth rate only reached 2.6 per cent.

Việt Nam has emerged as a stronger, more resilient economy over the past years. It recovered strongly from the low “base” two years ago to shine a light in a world of challenges and uncertainties.

The country’s gross domestic product grew at 8.02 per cent in 2022, the fastest pace over the past 25 years, backed by retail sales (reflecting final consumption), investment (especially FDI disbursement), and impressively increased exports.

We, however, cannot rest on our laurels. Global economic and political uncertainties, challenges and difficulties that have appeared since the end of the third quarter last year are likely to remain for this year. There are several factors that need to be taken into account.

First of all, aggregate demand is driving growth. Total retail sales last year increased by 19.8 per cent thanks to domestic consumption and tourism exceeding 2019 levels before COVID-19.

This increase will be difficult to maintain for this year when outbound tourism accelerates (actually seen by the end of last year), unless the attraction of international tourism is highly effective (it did not reach the target of attracting five million foreign visitors last year, and was much lower than 18 million visitors in 2019).

In late 2021 and early 2022, Việt Nam had high hopes that public investment would be the driving force for post-pandemic recovery. That’s not to mention a two-year Socio-economic Recovery and Development Programme from 2022-2023 with support money amounting up to VNĐ350 trillion (US$15.4 billion), approved by the National Assembly from the beginning of 2022.

Investment disbursement and programme implementation were, however, slow despite a little improvement in the fourth quarter of 2022. By the end of November, less than 60 per cent of the public investment plan had been implemented. About VNĐ60 trillion from the economic recovery and development package was actually spent. Private investment was also stagnating; except for foreign direct investment (FDI) disbursement which was quite good, reaching nearly $19.7 billion, an increase of 15.1 per cent compared to 2021.

Building public confidence, promoting public investment disbursement and the Recovery and Development Programme will have great implications for growth in 2023 and beyond.

Commodity exports last year also had a 10.6 per cent jump, fetching more than $372 billion. The downward trend was clearly seen when in the first nine months of the year, exports surged by 17.3 per cent. The significant drop in orders of manufacturing and processing firms in the last three months indicated an uncertain and lacklustre future.

In the last quarter of last year, S&P Global Vietnam Manufacturing Purchasing Managers Index declined to below the crucial break-even point of 50. In November and December, it hit 47.4 and 46.3 respectively, down from 50.6 in October. This indicates that Việt Nam’s manufacturing sector can be in a contraction.

This is understandable when inflation in key markets, including the US and EU, was stemming consumer spending. In addition, as Fitch Solutions suggests, a likely rebound in demand from China after its zero-COVID policy was eased and the country reopened its economy on January 8 will not be enough to offset the impact of a further weakening in global demand.

Lessons learned during the pandemic such as closely monitoring the situation, being flexible in product transformation, taking advantage of FTAs, diversifying markets/partners, transforming governance methods, even restructuring, still have the same value.

The recovery and development programme has taken into account macro risks (inflation, public debt, financial speculation). But until the second quarter of 2022, the financial-monetary pressure was fully recognised. The pressure had been mounting since the end of the third quarter. Average inflation was low, but inflation still rose rapidly compared to the same period in the previous year. Consumer prices in December increased by 4.55 per cent from a year earlier.

The VND/USD exchange rate in October depreciated nominally by 8.9 per cent. The State Bank of Việt Nam was forced to widen exchange rate band from 3 per cent to 5 per cent and raise the operating interest rate twice, 1 percentage point each time. Little liquidity is left for economic recovery due to maturity mismatch problem in banking system and monetary tightening. Market confidence was eroded when many legal violations were discovered, further heightening stock and corporate bond market volatility.

Looking to the bright side, it can be said that many positive expectations are not baseless.

Many forecast that the world economy and many of Việt Nam’s main partners will experience a mild recession. The US economy may have a soft landing and China’s economy this year will grow better than last year (4.4 per cent compared to 3.2 per cent) due to easing the zero-COVID policy and stabilising the real estate market.

Financial-monetary pressure from outside is likely to ease. The Fed’s policy will be more dovish, both in terms of intensity and frequency of interest rate hikes. High global inflation will peak and gradually decline this year. Liquidity tension in the Vietnamese financial and monetary market at the beginning of December last year was relieved by the central bank lifting the credit room by 1.5-2 percentage points. Monetary policy response led to the ease of pressure in foreign exchange market. At the end of 2022, nominal depreciation of VND/USD exchange rate was down to only about 3.5 per cent.

Disbursement of public investment and the recovery programme is expected to be accelerated. Along with it, substantial improvement in the investment environment and a commitment to structural reform will restore market confidence, thereby boosting investment and consumption.

Last but not least, Việt Nam still has a lot of potentials to attract quality FDI, especially when FDI flows to each country are highly selective and often characterised by comparative advantage, business environment, market connectivity and access (such as FTAs), trust in cooperation, and the guarantee of intellectual property rights.

It is believed that the ratio of realised FDI capital to registered capital increased from 54.3 per cent to 82.3 per cent between 2019 and 2022, and the rising proportion of FDI destined to high-tech and high value-added activities are signs that Việt Nam is capturing an increased part of global value-added manufacturing. This would be great growth momentum for the country in the future by creating jobs and making spillover effects to the whole economy.

In a world full of uncertainties and challenges, it is very necessary to “rethink, redesign, rebuild”, and “take actions more decisively, wisely and flexibly” as stated by the Prime Minister.

Hopefully, Việt Nam can continue its path to success in 2023 like what it generally did last year. VNS

*Võ Trí Thành is a senior economist at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. A doctorate in economics from the Australian National University, Thành mainly undertakes research and provides consultation on issues related to macroeconomic policies, trade liberalisation and international economic integration. Other areas of interest include institutional reforms and financial systems. He authors Việt Nam News column Analyst’s Pick.   LINK


Henig:  Industry and trade sector drives development

06:00 | 22/01/2023

(VEN) – Minister of Industry and Trade Nguyen Hong Dien, a member of the Central Committee of the Communist Party of Vietnam, spoke with Vietnam Economic News about the 2022 industry and trade sector achievements and its 2023 plans.

Could you tell us about the industry and trade sector’s 2022 achievements and contributions to Vietnam’s economic development?

In 2022, despite major adverse impacts and the COVID-19 pandemic, Vietnam experienced strong economic recovery and reached its macroeconomic targets.The country maintained macroeconomic stability, ensured major economic balances and reached high gross domestic product (GDP) growth.

The industry and trade sector contributed significantly to those achievements by realizing or exceeding targets set by the National Assembly and the Government. Vietnam reached an Index of Industrial Production (IIP) of nine percent (almost double that in 2021), and a 21-percent increase in total retail sales of goods and service revenues (almost triple the 8-percent target). In the first 11 months of 2022, the country’s budget revenues were 16.1 and 17.4 percent higher than the target and the same period of 2021, respectively.

Industry continues to be a major driving force of the country’s economic growth. Vietnam has maintained its leading position among countries and territories in terms of international trade while ensuring smooth supply chains of goods for the domestic market. The Ministry of Industry and Trade overcame difficulties and suggested solutions to ensure petroleum supply.

Vietnam has renovated trade promotion and improved the operational efficiency of its trade offices abroad.

The industry and trade sector has ensured sufficient power supply for people’s daily life and production in the post-pandemic period, contributing to production resumption and economic recovery.

Implementation of free trade agreements (FTAs) that Vietnam has signed contributed to the country’s foreign trade, while trade remedies reached outstanding achievements, protecting domestic production and markets.

Vietnam reached a record high foreign trade value of US$732.5 billion (up 9.5 percent from 2021) and exported US$11.2 billion more than it imported in 2022 (almost triple that in 2021), contributing to the country’s trade balance, foreign reserve, and interest rate and macroeconomic stability. This is the seventh year in a row that Vietnam has logged a trade surplus.

What were 2022 domestic market highlights?

In the post-pandemic period, the domestic market has recovered quickly and has done better than it did in the pre-pandemic period.

Domestic trade and shopping demand have grown well, while consumption stimulation programs, including trade promotion events, were held simultaneously throughout localities nationwide. Supply-demand connection was implemented efficiently, while goods prices were kept relatively stable, and domestic manufacturers were connected with leading distributors nationwide.

In 2022, Vietnam’s e-commerce market value was estimated at US$16.4 billion, accounting for 7.5 percent of the country’s sales of goods and service revenues. With an annual increase of 20 percent, Vietnam was ranked fifth among countries worldwide in terms of e-commerce growth by eMarketer.

The industry and trade sector are assisting businesses in different localities to promote supply-demand connections and find new product sources. Many large distribution systems have increased goods stockpiles and launched trade promotion programs to meet the growing demand for goods in the final weeks of the lunar year.

What are the industry and trade sector’s 2023 tasks, targets and solutions?

In the context of the complicated and unpredictable international situation, the Ministry of Industry and Trade will focus on the following key tasks.

The ministry will further efficiently follow and realize guidelines and policies of the Party and the State, especially those related to industrial and trade development, renovate and improve institution building (focusing on industrial development and policies), prepare action plans for and realize socioeconomic development and investment environment and national competitiveness improvement, while keeping eye on international and domestic situations to suggest relevant responses.

The sector will accelerate its restructuring based on science, technology, innovation and digitalization, speed up key infrastructure projects, simplify administrative procedures for new production and mining projects, provide suggestions for international economic integration, especially policies on foreign direct investment (FDI) attraction in the industry and trade sector, encourage FDI enterprises to support, transfer technology and share management expertise with domestic enterprises, and form supply chains of materials, improving the competitiveness of Vietnamese enterprises and their participation in global production and supply chains.

The ministry will consistently and efficiently implement free trade agreements, increase cooperation with potential neighboring markets, and assist localities and businesses to expand and diversify markets, supply chains, imports and exports, and focus on branding and sustainable export development.

Other tasks and solutions include developing domestic trade, combining traditional with modern trade, efficiently exploiting the potential of the country’s 100 million domestic consumers, closely monitor supply, demand, prices and markets of essential commodities, improve market inspection and control, combat smuggling, trade fraud, origin fraud, and unfair competition, better trade remedies, ensure a healthy and equal business and production environment for enterprises, and protect production and consumer interests in compliance with international commitments.

The sector will strengthen administrative disciplines, improve management and administration efficiency, innovate working styles and methods, accelerate administrative reform to encourage investors, producers and traders, promote information technology application, and continue building its e-government.   LINK

Henig:  Company bosses share outlook on economy in 2023

January, 22/2023 – 09:39

2023 is predicted to be a tough year due to various factors like inflation, high interest rates and the Ukraine-Russia conflict. But companies in Việt Nam say they have various strategies in place to overcome the challenges. Việt Nam News reporter Thu Ngân asks senior executives at a number of companies about the strategies and where they think the Vietnamese economy and their own sectors are headed.

2023 is predicted to be a tough year due to various factors like inflation, high interest rates and the Ukraine-Russia conflict. But companies in Việt Nam say they have various strategies in place to overcome the challenges. Việt Nam News reporter Thu Ngân asks senior executives at a number of companies about the strategies and where they think the Vietnamese economy and their own sectors are headed.

Trang Bùi, General Manager Cushman & Wakefield Vietnam

The mild recession in the last quarter of 2022 will continue into the first quarter of 2023. Việt Nam has gone through four real estate cycles, and Cushman & Wakefield anticipates that the real estate industry will go through the current economic downturn more quickly than in previous crises, allowing for recovery in the real estate market in the second half of 2023. In the process of working with domestic and foreign investors, we have noticed there is still strong demand for residential, industrial, retail, and logistics properties.

The major office-based organisations appear to be especially reticent about the hybrid workplace strategy and are taking more time to properly understand its impact on the organisation. Next year we estimate about 140,000 square metres of new grade A & B office space will enter the HCM City market, and this is expected to ease tension related to rents and supply.

The Government is focusing on regulating middle renting and encouraging home ownership in combination with a strong push for social housing. Increasing housing stock in the mid- and lower-priced sectors should promote flow and be a crucial link in the housing stock between social and owner-occupied housing. Therefore, even in 2023 we expect the housing market to remain under tension.

Despite an uncertain economic outlook, retailers continue to seek new physical retail space on sought-after high streets. Investor portfolios are being optimised through relocation and consolidation. This leads to relatively stable retail rents, especially in larger shopping cities. The demand for logistics real estate has remained high despite the current tight market situation and restrictions on new project developments due to the shortage of lands, building materials and administrative support. We forecast the industrial sector will become the next market leader in 2023.

Cushman & Wakefield’s business in Việt Nam has grown considerably in recent years, and 2022 marked our 15th year in Việt Nam.

We have a stable and growing business in Southeast Asia and Việt Nam is an integral part of this growth trajectory. Despite some volatility in the market, our regional and local leaders are excited by the bright prospects of the Việt Nam’s property market.

Kiệt Phạm, Vice President & Country Head of Zoomcar Vietnam

Being open to global trade, Việt Nam’s economy is greatly influenced by the international context. There are many forecasts of an economic recession in 2023, but in my opinion we will not quite see a recession next year, though growth will be lower than in 2022. The pandemic is basically under control, and even though the war between Russia and Ukraine will continue to cause unpredictable fluctuations in food and energy prices, we are prepared and have countermeasures in place. Businesses should not lose trust in our economy.

In Việt Nam, we have done very well in controlling the pandemic as well as inflation, thanks to the great efforts from the Government and authorities at all levels. Besides, we have a very strong domestic market with nearly 100 million people, which is a great driving force for the development of the local economy in terms of consumption, investment and tourism. Earlier, Việt Nam’s economy was mostly relying on exports and FDI, but that has changed. We are a developing country with a flourishing domestic market, grown and mature local businesses, a young population, and a growing middle class. We can completely rely on our inner strength to grow the economy.

This also bodes well for the services sector. According to market research by Mordorintelligence, Việt Nam’s car rental market was valued at US$463 million in 2021 and is expected to reach $884 million in 2027 with a compounded annual growth rate of about 14 per cent in the period from now to 2027. On the other hand, the car ownership rate in Việt Nam is now reaching 23 cars per 1,000 people, which is still low compared to the region, while demand for transportation is high. These are bullish factors for the self-driving car rental industry in Việt Nam.

Despite the great potential, Việt Nam’s car-sharing market also faces challenges. A big challenge is the perception of car owners who still consider their vehicle first and foremost as a great asset that they don’t want to rent. But in fact, an owned car is also a liability, as its value decreases over time. We always tell our hosts that the car is an investment that they should optimise for the best benefit.

Besides that, the self-driving car rental service relies too much on seasonal occasions and typical use cases of leisure trips due to the legacy of traditional car rental practices such as: high deposits, lengthy and inconvenient renting process, and high pricing.

We believe that overall local consumers still do not fully understand the benefits of car-sharing platforms like Zoomcar, which are convenience, much better security/safety protection, affordability and transparency. In the initial days, the Zoomcar team had to meet and talk to car owners individually, convincing them of the benefits of the platforms for both car owners and users in Việt Nam. Thanks to the non-stop efforts and the team’s hard work, we have gradually won the trust of Vietnamese users.

Despite a difficult 2022, Zoomcar Vietnam achieved the remarkable milestone of closing in on breakeven at the transaction level after just one year of operation.

In our first year, there were zero major accidents/incidents in the tens of thousands of bookings served. We also secured strong positive feedback from guests who love the experience of using Zoomcar as well as from hosts who have been earning extra income from their idling cars.

In 2023, we will continue to stay laser-focused on improving our products and services. We plan to expand to Hà Nội and then Đà Nẵng. This will bring us a step closer to our mission of creating localised solutions that address pressing challenges linked to urban mobility in Việt Nam. Our goal is that by the end of 2023 Zoomcar will be the largest self-driving car rental e-commerce platform in Việt Nam. This is quite a challenging goal, but I strongly believe we can do it.

Dane Fort, CEO of FLG Vietnam

The forthcoming inflationary environment impacts every business like ours in Việt Nam as it puts pressure on our costs and pressure on our members’ and potential members’ discretionary spending.

Still, we have seen similar pressures before, and the key to weathering the storm is the same now as it was then: sound financial management practices. We demonstrated this during the global financial crisis of 2008 and more recently during COVID-19 pandemic. Some of our competitors have failed to do so, and we see them starting to falter now – with some of the boutique gyms in the fitness sector proving unable to continue to attract and service their members in this environment, and some of the larger companies in fitness either closing their doors or drastically scaling back expansion plans.

Conversely, we are launching a new brand which we think fits the tighter times well with California Active. It replaces our Jetts brand with an affordable entry point to Cali’s services as well as an upgrade path to broader Cali membership, and this is one key way that we are adapting our business to ensure we have competitive service offerings for the market against a backdrop of reduced spending and higher inflation.

In the end, the key to success in 2023 is going to be focusing on what we have always done best: providing an amazing member experience nationwide to people looking to improve their health and improve their lives – and doing so at a scale, which no one else in our industry can rival.