FOREIGN INVESTOR: SURPLUS WHILE CHALLENGES AHEAD

bigmoneyvietnam - Ngày : 07/02/2019 12:18 - Lượt xem: 38

FOREIGN INVESTOR: SURPLUS WHILE CHALLENGES AHEAD


2018 ends as a successful year for Vietnam’s Trading activities. Vietnam has a trade surplus for the third consecutive year with a record high value of 6.8 billion USD, of which FDI surplus was 30.1 billion USD. Growth of imports and exports in 2018 was slower than in 2017 but still positive. Total exports increased by 13.2% YoY to 243.5 billion USD. Total imports increased by 11.1% YoY to 236.7 billion USD. Total turnover reached 480 billion USD, equivalent to 196% of GDP, bringing Vietnam into one of the largest open economies in the world. 2018 also saw Vietnam’s success in international integration efforts with the official CPTPP signed in March 2018 and significant progress on the EVFTA agreement (The EU- Vietnam free trade agreement). The openness of the economy increased rapidly, meaning that Vietnam’s economy is more sensitive to external developments. The US-China trade war and the initial symptoms of the economic downturn, especially the slowdown of China’s economy, have gradually influenced Vietnam’s economy as these are two main trading partners of Vietnam.

FDI decelerated, shifting towards internal forces

Accounting for 70% of exports and 60% of imported products, FDI has a significant influence on trading activities. However, growth of FDI enterprises in both imports and exports have decelerated rapidly, reaching only 12.4% YoY and 10.8% YoY in 2018, compared with the increase of 22.9% YoY and 26.6% YoY in 2017, and they were lower than the domestic enterprises (up 15.4% and 16.4%). The FDI group’s performance was affected by the two largest export products, which were Telephones and Computers, accounting for 28.6% and 16.2% of total exports, respectively. Both products showed a strong downward trend in the last months of the year. Computers and components grew negatively for the final two months of 2018, bringing growth in 2018 to only 12.5% YoY, down sharply from 36.9% YoY in 2017. In December, Telephone exports decreased by 39.7% from the previous month, 26.3% from December 2017 and increased only 8.5% YoY for the whole year, which was the lowest growth since 2010, when Vietnam started exporting Telephone products. According to IDC, global smartphone sales volume fell by 6% YoY in Q3 2018 to 355.2 million units. With negative growth in four consecutive quarters, the market fell into recession. Estimates show the smartphone market fell for the first time in 2018 (-3% yoy), after growing at an average rate of 16% in each of the previous five years. China, the largest market (accounting for 30% of global production), is estimated to have decreased by 8.8% in 2018. Not only Samsung had declining revenue from the mobilephone segment (-13.4% YoY in Q3 2018), but also other big manufacturers such as Apple, LG, and Sony were not brighter when the global smartphone market weakened. However, IDC forecasts that the smartphone market will recover slightly in 2019. Some other products of the FDI group maintained positive export growth such as cameras and video cameras (+ 31.2% YoY), machines and equipment (+ 27.4% YoY), textiles and garments (+ 15.1% YoY), and iron and steel (+ 53.8% YoY), but it was not enough to offset for overall growth. Imports of the FDI group were mainly input materials for production and export activities, so it was not outside the influence of this trend. The top 10 import items of Vietnam were mainly imported by FDI enterprises. Except for Iron and Petroleum products, the FDI group accounted for an outstanding proportion in all the remaining products, particularly Telephones and Computers and components, accounting for more than 90% of total imports. In addition to Other base metals (+ 35.1%YoY), all of the top items of FDI imports in 2018 grew slower than 2017. Two important input groups were Telephones and components and Machines and& equipment. These had negative growth of -5.2% YoY and -7.5% YoY in 2018. On theother hand, domestic import growth was quite positive with an increase of +16.4% YoY. Many of the main items had a growth rate of over 20% such as Fabrics, Plastics, Computers and components, Cameras & video cameras, and Other base metals because both domestic production and consumption improved. Crude oil imports increased by six times to 2.7 billion USD thanks to the operation of the Nghi Son refinery plant, while imports of Petroleum products only increased by 8.8% YoY (vs. +38.6% YoY in 2017). Imports of Pharmaceutical products decreased by 1% YoY due to the policy of prioritizing domestically produced products. Motor vehicles imports fell sharply in the first half of 2018 due to long time procedure progress to prove the requirements of the ASEAN Trade In Goods Agreement (ATIGA), which has taken effect since the beginning of 2018. According to the agreement, if the localization rate of products manufactured in ASEAN countries meet 40%, the tax rate will reduce the import duty of automobiles from 30% to 0%. Therefore, in the second half of 2018, the import of Motor vehicles recovered, and even the import of Completely Built Units (CBU) cars decreased by 20.2% YoY, CBUs under nine seats increased by 38.8% with 9/10 of these (48,000) imported from other ASEAN countries. Although exports of domestic firms in 2018 grew slower than in 2017 at 18.76% YoY, but still higher than FDI firms at +15.4% YoY, pulling the overall export growth to +13.2% YoY. The export of Textiles was a bright spot, maintaining a relatively stable increase of +16.5% YoY, compared to the 9.6% increase in 2017. These numbers included both FDI and domestic groups with the proportion of 60%/40%. In which, domestic enterprises showed a clear growth of +18.8% YoY, double the rate of 9.2% YoY in 2017. In 2018, the exports of the two groups and the imports of the FDI firms decelerated due to the direct and indirect effects of world demand. Imports of domestic enterprises continued to grow from 13.1% YoY in 2017 to 16.4% YoY in 2018, showing that domestic demand has remains consistent. Domestic demand is becoming more important as a key driver of growth in the context of the global economic fluctuations.

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(Source: SSI Securities Services)
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