After achieving the highest economic growth in the past 25 years last year, Vietnam's economy has been sluggish this year.
According to data released by the General Statistics Office of Vietnam (GSO), Vietnam's economic growth in the first quarter was 3.32%, which is the second lowest first-quarter figure in 12 years.
At the same time, Vietnam's exports in the first quarter of this year decreased by 11.9% year-on-year, and the number of enterprises that ceased operations and closed down nationwide reached as high as 42,900.
A more serious issue is that the textile industry, one of Vietnam's pillar industries, saw a sharp decline in export volume by 70%-80%, and the shipment of electronic products also decreased by 10.9% year-on-year.
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A few months ago, Vietnam's GDP in 2022 exceeded 400 billion US dollars for the first time, with an annual economic growth rate of 8.02%, ranking first in Asia, which made many people marvel at the rise of the Vietnamese economy.
However, just a few months later, all the above has become a thing of the past, dissipating in the blink of an eye, and the decline of Vietnam's economy is unstoppable, seemingly about to collapse.
What happened to Vietnam's manufacturing?
Is it really true, as some people say, that this is because our country has taken away Vietnam's orders?
External demand slows down, and Vietnam's exports plummet sharply.
In March this year, Pouyuen, the largest shoe factory in Vietnam, submitted a document stating that due to difficulties in orders, an agreement to terminate labor contracts with 2,400 workers was reached.By May 13th, Pouyuan had publicly announced a plan to lay off 5,744 employees, citing "uncertainty in the business environment and the need for flexible production scheduling" as the reason.
It's important to remember that, in the past, Pouyuan was so overwhelmed with orders that they struggled to recruit enough workers. Now, with the need for mass layoffs, one can only imagine the state of their operations.
The primary reason for Vietnam's economic downturn and the difficulties faced by businesses is the slowdown in external demand, which has led to a sharp decline in exports, exerting a significant dampening effect on Vietnam's economic development.
As Vietnamese Prime Minister Pham Minh Chinh himself stated: "Vietnam is affected by the global economic downturn, facing more challenges than opportunities."
Taking the United States, Vietnam's largest "financial backer," as an example, its export volume accounts for 30% of Vietnam's total exports.
Data shows that from 2017 to 2022, Vietnam's trade growth rate with the United States was 156%.
However, due to high inflationary pressures within the United States and a sudden drop in consumer demand, in January of this year, the container export volume from 18 Asian economies to the United States decreased by 20.1%, with Vietnam's exports dropping by 12.5%.
In the first three months of this year, the bilateral trade volume between Vietnam and the United States fell by 19% year-on-year, with a significant reduction in demand from the United States leading to a severe decline in Vietnam's total exports.
For Vietnam, which heavily relies on exports for economic development, the global economic downturn is akin to a "force majeure" event. With external demand slowing down, Vietnam's situation naturally becomes increasingly pessimistic.
"Domestic concerns" are dragging down Vietnam's economic development.In addition to external factors, Vietnam is also plagued with internal issues, with "domestic troubles" equally hindering the country's economic development. For instance, the recent "electricity shortage" that caused quite a stir in Vietnam led to a series of business closures among domestic enterprises, turning once bustling factory areas into quiet zones.
According to Vietnamese media reports, industrial parks housing factories of multinational corporations such as Canon and Samsung have experienced production interruptions due to power outages, affecting them to varying degrees. In fact, not just this year, but every year when the high-temperature weather arrives, Vietnam experiences widespread power outages, with the "electricity shortage" issue persistently troubling the country.
As early as 2019, the Vietnam Economic Committee had issued a warning, stating that "Vietnam faces a predicament of electricity insufficiency." To maintain rapid economic growth, the electricity issue must be addressed as a priority. However, several years have passed, and Vietnam's power system remains unchanged, with no improvements made.
The inadequate infrastructure, to the extent that even basic electricity supply issues cannot be resolved, and the country even has to purchase electricity from China, is undoubtedly a significant vulnerability for Vietnam. Furthermore, last year, the Vietnamese government initiated a financial anti-corruption campaign within the country, unprecedented in its intensity to regulate the real estate market. Even real estate magnates like Zhang Meilan were imprisoned, causing a climate of fear in the domestic real estate market.
This not only scared away a large number of property investors but also, after increasing the regulatory scrutiny on real estate developers issuing new debt, the Vietnamese real estate industry is now facing a significant funding gap. The real estate crisis, in turn, has had a knock-on effect on upstream and downstream industries, leading to a decline in the entire industrial GDP and dragging down the growth of Vietnam's GDP in the first quarter.Therefore, it is understandable that Vietnam's economy has faced both internal and external challenges this year, necessitating an emergency brake.
Has our country taken away Vietnam's orders?
Vietnam's export orders have significantly decreased, and some people online believe that our country has taken away a portion of Vietnam's orders. However, this claim is actually inaccurate.
On one hand, the global economy is sluggish, and consumer demand in Europe and America has plummeted. This year, the export situation across Asia as a whole has not been very good.
For instance, South Korea has seen a 14.2% year-on-year decline in exports in April, according to data released by the Korea Customs Service, marking a continuous decline for seven months.
Although our country's exports grew by 4.8% in the first quarter, achieving a "good start," the value of goods exported in May fell to $283.5 billion, a decrease of 8% year-on-year, indicating that it is also under pressure.
Thus, in the current complex and challenging foreign trade situation, everyone is facing tough times, and naturally, there is no issue of one party taking away another's orders.
On the other hand, Vietnam's industries are almost entirely mid-to-low-end manufacturing, lacking in technological content.
However, the days when our country had to exchange 800 million shirts for an airplane from others are over. The proportion of labor-intensive product exports has already decreased to 17.1%.
In contrast, our country's automotive, photovoltaic, and lithium battery industries have developed rapidly and have become the "mainstay" of foreign trade industries.Therefore, the collapse of Vietnam's economy is entirely due to its small size, excessive dependence on exports, unbalanced development, and lack of risk resistance. The claim that our country has taken away Vietnam's orders is simply untenable.
In conclusion: The Vietnamese economy has gone from racing ahead to hitting the brakes, which also serves as a warning for us:
The key to driving economic development still lies in ourselves. Foreign capital and foreign markets are unreliable. Relying on domestic industries and consumer markets is the true way to achieve economic recovery.
Otherwise, like Vietnam, any slight change in the external environment can turn into a storm within the country. In the end, they still blame others for taking their orders. The truth is that we must strive to be stronger.