Exports hit hard by global slowdown: HSBC

HSBC’s latest economic report has reported that Vietnam’s export turnovers in November decreased 7.4% against November 2021. Earlier, HSBC predicted exports would drop by only 2.3%.

The world’s Purchasing Managers’ Index (PMI) has continuously decreased since May 2021 and has sunk below the 50-point mark since September 2022, following a decrease in new orders.

A PMI reading above 50 points indicates economic expansion, while a reading below 50 reflects contraction.

As a result, Vietnamese factories have received fewer orders from foreign clients. Since September, and over 630,000 workers have been affected by the drop in orders, with some 90% of them having to reduce their working hours and pay.

HSBC said that the main reason is problems in the electronics sector, which accounts for about 35% of Vietnam’s total export turnover.

Global electronics orders – including from Vietnam’s three main export markets: the U.S., China and Europe — have declined sharply since the second half of this year.

Other Vietnamese export categories have also been affected by the recession in the U.S. The U.S. housing market has slowed due to higher lending interest rates, leading to a significant decline in wood-based products imported from Vietnam.

Traditional goods such as garments, textiles and footwear have also experienced declines in export turnovers.

In the context of high inflation and a shift in consumption from goods to services in Western countries, Vietnamese markets will suffer further declines in this sector, HSBC predicted.

Despite external difficulties, the country has maintained strong domestic demand, which has continued to support local economic growth, according to the bank.

Retail sales posted a year-on-year rise of 17% in November. Meanwhile, Vietnam has welcomed some 600,000 foreign tourists recently, bringing the total number of international arrivals to the country to nearly 3 million.

Despite the absence of Chinese visitors due to China’s Zero Covid policy, Vietnam has actively tapped new markets like India.

According to the Vietnam National Administration of Tourism, Indian tourists have accounted for around 4% of the total number of foreign visitors to Vietnam so far this year.

Expanding into new markets is a good way to provide Vietnam necessary support, according to HSBC.

However, the bank warned that inflation is a concern.

Headline inflation in November increased by 4.4% against the same period last year, while core inflation was close to 5%.

Unlike neighboring countries, Vietnam is facing an energy shortage, which is putting pressure on headline inflation.

Inflation will increase over the next few quarters, making Vietnam’s central bank more likely to take further monetary measures to curb it, HSBC predicted.