Expectations for a "new look" in the last months of the year

Vietnam's economy has entered the second half of 2023 with signs of improvement, expecting a more positive recovery.

Kỳ vọng kinh tế vĩ mô 'khoác áo mới' những tháng cuối năm

Vietnam's economy has entered the second half of 2023 with signs of improvement, with expectations of a more positive recovery. (Source: Saigon Times)

Signs of improvement

After struggling in the first 6 months of the year, the Vietnamese economy has started the first month of the second half of the year with quite positive information. The most obvious is industrial production. This is a very notable index, because it can reflect many aspects of the economy. "Industrial production in July was better than the previous month", when announcing statistics on the socio-economic situation in July and the first 7 months of 2023, the General Statistics Office commented.

It is true that it has improved compared to the previous month, when the Index of Industrial Production (IIP) in July 2023 not only increased by 3.9% compared to the previous month, but also increased by 3.7% compared to the same period last year. Notably, the IIP in July 2023 increased again in some localities. Bac Ninh is a typical example. The province's IIP in July 2023 increased by 23.8% compared to the previous month, after continuously decreasing in the first months of the year (this is one of the important reasons why Bac Ninh had negative growth of 12.59%, ranking at the bottom of the "ranking" in GRDP growth in the first half of the year).

Not only Bac Ninh, many key industrial production centers of the country also had positive IIP growth in the first month of the third quarter of 2023, such as Thai Nguyen increased by 9%; Vinh Phuc increased by 5.8%; Binh Duong increased by 2.3%; Ho Chi Minh City increased by 1.9%; Long An increased by 0.8%... If calculated in 7 months, compared to the same period last year, IIP increased in 49 localities and decreased in 14 localities nationwide. Thus, compared to the figure of 6 months, there was 1 more locality with positive increase and 1 less locality with negative increase in IIP index.

Signs of industrial production rebounding may also mean more positive exports and domestic consumption. Figures from the General Statistics Office show that the export turnover of goods in July 2023 is estimated at 29.68 billion USD, up 0.8% compared to June 2023. Meanwhile, foreign investment attraction for the first time in the year increased by 4.5% compared to the same period last year, reaching nearly 16.24 billion USD.

This is probably also quite consistent with the data on the Vietnam Manufacturing Purchasing Managers’ Index (PMI) that S&P Global has just announced. Accordingly, Vietnam’s PMI increased to 48.7 points in July, higher than the 46.2 points in June. Although the figure is still below 50 points, which means that production conditions have declined for the fifth consecutive month, this decline is quite mild and the mildest in this period.

While the improvement in industrial production and exports is quite “mild”, perhaps one of the main drivers of interest is the service and tourism sectors. Statistics show that the situation is getting better and better.

In July 2023, there were more than 1 million international visitors to Vietnam, an increase of 6.5% compared to the previous month and 2.9 times higher than the same period last year. If calculated for the 7 months, international visitors to Vietnam are estimated at more than 6.6 million, 6.9 times higher than the same period last year.

In addition to the bustling domestic tourism activities during the peak season, the revenue from accommodation and catering services in the first 7 months of 2023 is estimated at VND 377,300 billion, accounting for 10.7% of total retail sales of goods and consumer services revenue, up 16.3% over the same period last year. Meanwhile, revenue from travel services is estimated at VND 18,600 billion, accounting for 0.5% of total retail sales of goods and consumer services revenue, up 53.6% over the same period last year.

Many major tourist destinations have seen tourism service revenue increase sharply in the first 7 months of the year compared to the same period last year, such as Da Nang up 99.7%; Hanoi up 89.7%; Quang Ninh up 82.5%; Khanh Hoa up 75.1%...

Expect a recovery in the second half of the year

Despite signs of improvement, it is clear that the economy is still facing many difficulties. In 7 months, IIP still decreased by 0.7% compared to the same period last year; exports decreased by 10.6%, estimated at 194.73 billion USD; international visitors to Vietnam only reached 67.5% compared to the same period in 2019 - a year without Covid-19...

Many other indicators can be cited to show that Vietnam's economy is still very "unstable". In 7 months, 113,300 enterprises had to leave the market, an increase of 19.8% over the same period, while the number of newly established enterprises was only 131,900 enterprises, a decrease of 1.4% over the same period. Budget revenue in 7 months is estimated to decrease by 7.8%, while expenditure is estimated to increase by 13.7% over the same period in 2022.

Even the purchasing power of the economy has not improved much, when in the first 7 months of the year, total retail sales of goods and consumer service revenue at current prices increased by only 10.4% compared to the same period last year, excluding price factors, it increased by 9.6%. Meanwhile, last year, the corresponding increases were 15.7% and 11.7%...

In addition, in the past 7 months, Vietnam had a trade surplus of 15.23 billion USD. The fact that the economy continues to have a large trade surplus raises concerns that industrial production and exports will continue to face difficulties in the coming time. The reason is that Vietnam's economy depends heavily on imported raw materials, but the decrease in imports shows that businesses are still lacking orders, so there is no need to import input materials. Vietnam's PMI index in July 2023 is still below 50 points, which also shows that the situation cannot improve overnight.

However, in recent reports, international organizations have had more positive assessments of Vietnam's economy in the second half of the year. In its latest report, Standard Chartered Bank forecasts that Vietnam's economy will recover in the second half of 2023.

“We see early signs of economic recovery. Vietnam’s GDP growth in the second half of the year is forecast to reach 7% year-on-year, up from 3.7% in the first half. This shows a clearer recovery in the second half of the year,” said Ms. Michele Wee, CEO of Standard Chartered Bank Vietnam, adding that the medium-term outlook for Vietnam’s economy still promises stability.

The International Monetary Fund (IMF) in late June 2023 stated that Vietnam's economic growth would recover in the second half of 2023 thanks to recovering exports and loosening domestic policies. Reports from the Ministry of Planning and Investment also said that the economic situation would improve in the second half of the year.

However, in order for the economy to truly overcome difficulties and recover, according to Deputy Minister of Planning and Investment Tran Quoc Phuong, it is necessary to resolutely and effectively implement solutions to promote public investment disbursement, stimulate consumption and investment, and boost exports. These are important growth drivers of the economy.

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