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Business Times
2 days ago
- Business
- Business Times
Vietnam's exports and FDI pledges continue on robust growth track in May
[HO CHI MINH CITY] Vietnam's trade and foreign direct investment (FDI) continued to chart strong growth in May, driven by front-loading demand following the temporary suspension of 'Liberation Day' tariffs from the US, Vietnam's largest export market. Estimates from the government's statistics agency (NSO) on Friday (June 6) showed that exports rose by 17 per cent year on year to US$39.6 billion, down slightly from the on-year 19.8 per cent rate for April. Imports rose year on year by 14.1 per cent to US$39.04 billion, also by less than April 22.9 per cent rise on year. On a monthly basis, exports and imports grew by 5.7 per cent and 5.9 per cent, respectively. The electronics sector led exports, with a 5.2 per cent monthly increase and a 52.4 per cent year-on-year rise to US$9.2 billion. In contrast, footwear and textiles – key exports to the US – grew more modestly, by 1.9 per cent and 9.2 per cent, respectively, down from double-digit figures in April. For the January-to-May period, Vietnam recorded a trade surplus of US$4.67 billion, narrowing from US$8.71 billion in the same period of 2024, when exports and imports rose by 14 per cent and 17.4 per cent, respectively. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Analysts expect front-loading to persist through the second quarter of 2025, with the momentum likely to ease once the US' 90-day tariff suspension expires in early July. Vietnam's industrial production remained healthy, with a 9.4 per cent year-on-year increase in May, though it eased slightly from a 9.6 per cent growth in April. Despite marking the fourth consecutive month of expansion, it was the softest gain since a contraction in January. Soft data also indicated a contraction in factory activity. The S&P Global Vietnam Purchasing Managers' Index (PMI) for May recorded its second consecutive month below the 50 threshold, reflecting a slowdown driven by declining new orders amid reduced foreign demand linked to US tariff uncertainties. Adam Ahmad Samdin, economist at Oxford Economics, also highlighted increasing downside risks to the think tank's 6.3 per cent year-on-year GDP growth forecast for the country this year. 'The authorities may not be able to come to a deal with the US due to Vietnam's inherent reliance on Chinese inputs, potentially bringing tariffs back to 46 per cent,' he said. Reliance on Chinese input In April, President Donald Trump imposed a 46 per cent 'reciprocal' tariff on Vietnam, among the highest among US trading partners. These import taxes have been temporarily reduced to 10 per cent, with a Jul 9 deadline to reach a trade deal. Reuters reported this week that Washington has sent Hanoi tough requests for tariff discussions, including demands that the South-east Asian country reduce its reliance on materials and components from China. US Secretary of Commerce Howard Lutnick said on Wednesday that there is still room for talks if Vietnam curtails imports from China and reduces its trade deficit with the US, which amounted to US$123 billion last year. However, driven by the front-loading surge in the first five months of this year, the South-east Asian country recorded a growing trade surplus with the US – US$49.9 billion, marking a 28.5 per cent year-on-year increase. Meanwhile, China continued to be the primary source of its imports, comprising 39.5 per cent of the total. This swelled Vietnam's trade deficit with China to US$45.9 billion, a 40.3 per cent increase from the year-ago period. Strong FDI from China and Singapore Realised FDI in Vietnam rose 7.9 per cent year on year to US$8.90 billion from January to May 2025, the highest in the same period in the past five years. FDI pledges hit US$18.39 billion, marking a 51.2 per cent surge from last year's figure. Singapore topped the investor list with over US$4.38 billion in registered FDI, accounting for 23.8 per cent of total foreign inflows; this was 30.1 per cent more than the year before. South Korea followed with more than US$2.93 billion, making up nearly 16 per cent of the total and marking a 2.47-time rise from the year before. In terms of new projects, mainland China remained the largest contributor, with 453 projects, up 30 per cent month on month and 2.5 times higher year on year. The value of these projects in the first five months was US$1.81 billion. Room to support growth In the domestic sector, Vietnam's retail sales advanced by 10.2 per cent year on year in May, easing from an almost two-year high of 11.1 per cent in the preceding month. Headline inflation rose by 3.2 per cent, up from 3.1 per cent in April, still below the 4.75 per cent cap imposed by the State Bank of Vietnam (SBV) . Samdin said: 'This should allow the SBV room for greater monetary easing later in the year, to achieve the ambitious 8 per cent growth target.' Meanwhile, economists at HSBC Global Research highlighted Vietnam's fiscal room to support growth, as the South-east Asian country has public debt-to-GDP ratio at around 40 per cent, the lowest in Asean. They also observed renewed commitment from the authorities to accelerating project implementation and ensuring timely completion, alongside a push to fast-track new transport and energy mega-projects. They wrote in a May 12 note: 'Vietnam is keen to continue with its old playbook of pushing for infrastructure development. (This is able to) kill two birds with one stone by supporting growth while improving infrastructure connectivity.'
Business Times
06-05-2025
- Business
- Business Times
Vietnam sees strong exports, FDI pledges in April despite tariff woes
[HANOI] Vietnam had strong trade and foreign direct investment (FDI) growth in April, despite external challenges posed by the introduction of tariffs by the US, Vietnam's largest export market. Based on data released by the government's statistics body (GSO) on Tuesday (May 6), exports and imports rose sharply by 19.8 per cent and 22.9 per cent year on year, respectively, to US$37.45 billion and US$36.87 billion. 'This likely reflects a surge in front-loaded orders from the pause to 'Liberation Day' tariffs, and temporary exemptions on electronics,' noted Oxford Economics economist Adam Ahmad Samdin, expecting Vietnam's export growth to remain in the next few months. On Apr 2, US President Donald Trump announced a reciprocal tariff rate of 46 per cent on Vietnam – one of the highest levies in Asia. He later paused the tariffs on most countries for 90 days, during which the 10 per cent 'baseline' rate will be applied. Amid tariff uncertainties, Vietnam's major export category of computers and electronics in April surged 58.7 per cent from a year ago to US$8.1 billion. Shipments of footwear as well as textiles and garments – also key export products from Vietnam to the US – rose sharply by 20.5 per cent and 17.7 per cent, respectively, to US$2.2 billion and US$3 billion. In the first four months of 2025, the US remained Vietnam's largest export market, accounting for nearly 31 per cent of Vietnam's total outbound shipments. The South-east Asian country also maintained a sizeable trade surplus with the US at US$37.7 billion, up 24.9 per cent year on year. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Meanwhile, China continued to serve as the biggest import source, making up 39 per cent of Vietnam's total imports. This expanded Vietnam's trade deficit with China to US$35.1 billion, up 44.2 per cent from the year-ago period. In the year to April, Vietnam recorded a US$3.8 billion surplus, narrowing markedly from US$9.1 billion in the same period of 2024 as imports increased stronger than exports at 18.6 per cent and 13 per cent, respectively. FDI also accelerated with pledges reaching US$13.8 billion, marking close to 40 per cent growth compared to the same period last year. This indicates future foreign capital inflows into Vietnam, while actual disbursement in the four months grew firmly by 7.3 per cent to US$6.7 billion. Analysts said Vietnam's FDI attractiveness is attributed to its strong fundamentals, including an extensive network of 17 free trade agreements that offer large export markets beyond the US. 'While (multinational corporations) may pause on fresh FDI given the cloudy global economy, firms will think twice about relocating solely on basis of tariff differentials,' stated Maybank analysts in a note last month. Crank up domestic economy On the domestic front, retail sales growth climbed 11.1 per cent from a year ago last month – the strongest since May 2023, bringing the increase in the January-April period to 9.9 per cent. GSO attributed the expansion to increased consumer spending and travel demand during major national holidays, along with a surge in international arrivals, which rose 23.8 per cent year on year to 7.7 million in the first four months of this year. Headline inflation last month held steady at 3.1 per cent year over year, resulting in the average figure in the first four months at 3.2 per cent – well below the 5 per cent cap. However, core inflation, which strips out volatile items, quickened to 3.14 per cent in April, marking its highest level since November 2023. 'As (Asean) economies face the inevitable (trade turbulence), policymakers will likely crank their domestic economies to make up for the slack in trade, setting the stage for monetary and fiscal easing,' HSBC economists stated in a recent note. Analysts expect State Bank of Vietnam, the country's central bank, to lower policy interest rates and increase tolerance to the weaker dong. The local currency has depreciated about 1.3 per cent against the US dollar since the start of this year. In addition, fiscal policy support has been prepared, including the extension of tax payment deadlines, preferential loans for manufacturing, and value-added tax cuts. Vietnam's Prime Minister Pham Minh Chinh said on Monday that the country will adopt a flexible approach to managing its currency and interest rates to sustain loan demand and promote economic growth. He also urged an acceleration in disbursements for public investment and the development of key infrastructure projects, including high-speed railways and nuclear power plants. Uncertain tariff outlook S&P Global reported in its survey for the purchasing managers' index that Vietnam's factory activities contracted in April at the steepest fall since May 2023. Manufacturing new orders dropped the most in nearly two years, with demand from overseas declining more quickly amid the introduction of tariffs by the US and uncertain external market conditions. This led to lacklustre employment, with job cuts at the highest rate for three-and-a-half years. Manufacturers were also concerned about the production outlook in the months ahead, with business confidence falling to the lowest level since August 2021. 'The potential for further disruption to the sector as a result of additional tariffs meant that business confidence slumped and was one of the lowest on record,' said Andrew Harker, economics director at S&P Global Market Intelligence. Chinh said on Monday that the country is expected to begin its first bilateral trade negotiation session with the US on May 7 as one of the six prioritised nations for this round. On May 1, a Vietnamese delegation already travelled to the US to engage with US counterparts on trade. Despite various global think tanks and financial institutions lowering Vietnam's gross domestic product growth forecasts this year by one to two percentage points due to tariff challenges, the South-east Asian country kept its target unchanged at 8 per cent. In the first quarter of this year, Vietnam's economic expansion slowed to 6.9 per cent, from 7.6 per cent in the preceding three months.
