Commodity export is forecasted to face many difficulties in the second quarter, when the pandemic is still complicated. However, the opportunity to achieve the target of 7-8% growth as planned is still available if taking advantage of market opportunities.
Import-export turnover plummeted
In the context of many textile and apparel products facing difficulties due to postponement, extension of orders, masks are “salvage” of textile enterprises. 400 million medical face masks is the number in orders that Garco 10 corporation signed with the partner to delivery in July. In addition to medical face masks, Garco 10 also received orders from Germany and the US for antibacterial cloth face masks with a total of more than 20 million pieces
Garco 10 is one of the businesses that have successfully redirected products in line with market signals, contributing to export growth in the context of the Covid-19 pandemic making this activity difficult. According to the Ministry of Industry and Trade, if in the first quarter, Vietnam’s import and export activities were not much affected by the Covid-19 pandemic, then in the second quarter, this activity will face many challenges, especially because our economy has a large degree of openness, it will be influenced in many aspects by the international economic situation in the widespread context of the Covid-19 pandemic that is increasingly complicated and unpredictable.
Export activities are expected to have many opportunities in the second half of the year
Specifically, epidemics in many markets in Europe, the United States, ASEAN, and the Middle East have not been controlled, the countries applying measures to restrict travel that continue to affect the import and export activities of Vietnam. Since March, when the world has entered a pandemic phase with a rapid and dangerous spread, the Governments of countries have been issuing measures to control epidemics such as temporary closure of entry and exit, restrictions gatherings and crowded shopping, limiting the operation of shopping malls, etc. making the demand for consumer goods like textiles and footwear, furniture, etc. in many markets decreased.
In particular, the decline in commodity prices has also affected Vietnam’s merchandise exports. For example, in the first 4 months of 2020, the export price of cashew nuts decreased by 12.9% over the same period in 2019, coffee’s declined 2.2%, tea’s fell 13.1%, pepper’s decreased 19%. Especially, as of April 27, 2020, WTI crude oil price has plummeted 77.3% (equivalent to 53.46 USD/barrel) compared to early 2020, to 15.72 USD/barrel, etc. affecting the export of Vietnamese goods.
According to estimates, Vietnam’s export turnover in April 2020 was estimated at 19.7 billion USD, declining sharply by 18.4% compared to March 2020 and 3.5% over the same period in 2019.
Export turnover of most commodity groups decreased compared to March 2020. In particular, the largest drop was in processing industrial groups, decreasing 20% from the previous month, estimating at 16.4 billion USD. Export turnover of fuel and mineral groups also declined 18.6% compared to March 2020, reaching 247 million USD. Export turnover of agricultural and fishery groups decreased by 6.6% compared to March 2020, estimating at 2.02 billion USD.
Generally for the first 4 months of 2020, Vietnam’s export turnover of goods was estimated at 82.94 billion USD, rising 4.7% over the same period in 2019 (the same period increased by 6.5%).
Regarding imports, the import turnover in April was estimated at 20.4 billion USD, dropping 7.9% over the previous month, 2.3% over the same period in 2019. Generally for the first 4 months of 2020, national import turnover was estimated at 79.89 billion USD, increasing 2.1% over the same period (the same period increased by 10.7%). With such import and export situation, in April, Vietnam is estimated to have a trade deficit of 700 million USD. Generally, in the first 4 months of 2020, the trade balance continued to have a trade surplus of 3.04 billion USD, much higher than the surplus of 983 million USD in the first 4 months of 2019.
Waiting for opportunities from FTAs
Thus, after achieving a positive growth in the first quarter of 2020, Vietnam’s commercial activity in April 2020 began to be strongly affected by the Covid-19 pandemic. The negative effects of the Covid-19 pandemic are forecasted to have a clearer impact on Vietnam’s commercial activities in the second quarter of 2020 because from mid-March 2020 until now, the pandemic has seriously affected Vietnam’s major trading partners’ markets like the US, EU and Japan. However, if the pandemic is controlled in the second quarter of 2020, export activities are expected to increase again in the second half of the year and to continue to be the main growth engine of the Vietnamese economy in 2020 thanks to an increase in worldwide demand along with competitive advantages when EVFTA Agreement comes into effect. In addition, globally, many economies have launched large-scale stimulus packages to against the negative impacts of the Covid-19 pandemic on the economy. Most countries have increased fiscal spending to cope with the pandemic, maintain essential economic activities and support workers. In Vietnam, the Government, ministries and agencies have also been trying to implement many solutions to remove difficulties for businesses due to the impacts of Covid-19 pandemic.
Currently, the control of Covid-19 pandemic in China and South Korea has positive results; Other countries are also trying to control the pandemic, therefore, the demand is expected to gradually increase again in the near future.
Many countries gradually reopened their economy in the context of the ongoing battle againsting the Covid-19 pandemic. For example, Italy will start allowing the manufacturing industry to resume operations from May 4 in a plan to relax the blockade and allowing schools to open in September. Belgium also announced a plan to reopen businesses and schools between May and reopen restaurants from June 8. India, Iran and Israel restart businesses in areas with low risk of Covid-19 outbreaks. The governments of Australia and New Zealand are simultaneously preparing to gradually open the economy and some localities have carefully loosened the blockade.
In the country, on April 24, 2020, the US Department of Commerce (DOC) announced the official results of the 15th anti-dumping duty review (POR15) for the period from August 1, 2017 to July 31, 2018 for Vietnam’s catfish and basa fish products exported. Accordingly, the final tax rate for businesses that have participated in answering the questionnaire and cooperating with the DOC is 0.15 USD/kg (equivalent to about 3.8% of export price), being a significant reduction compared to the previous period (POR14) that is 1.37 USD/kg. Non-cooperating businesses will receive a tax rate of 2.39 USD/kg that unchanged from POR14. In addition, most of Vietnam’s major pangasius exporters continue to enjoy the tax rate of 0%. The anti-dumping tax rate for pangasius to the US market dropped sharply. Besides, export turnover of this commodity to some markets also showed positive signs of growth. This is a positive news for Vietnamese pangasius exporters in the context of the pandemic that is expected to impact on the domestic fish farming industry.
While the Covid-19 pandemic caused countries to take measures to restrict travel affecting trade promotion activities, online connectivity is an effective way to help Vietnamese enterprises to promote trade with foreign enterprises, expanding export markets. On April 21, 2020, for the first time, the Vietnam Trade Promotion Agency – under the Ministry of Industry and Trade collaborated with the Department of Commerce of the Guangxi Zhuang Autonomous Region – China to organize the Vietnam – China (Guangxi) Online Trade Conference. The conference had the connection and participation of more than 150 enterprises of the two countries operating in the field of agricultural products and foodstuffs, including 35 Vietnamese enterprises.
The EVFTA Agreement, which is expected to come into force in the second half of 2020, is desirable to open an opportunity to boost Vietnam’s exports to the EU in the last months of this year and the coming years. Under the EVFTA Agreement, up to 70% of goods are eligible for tariff reduction and the EU will eliminate import duties on 99.7% of tariff lines. This is a great advantage for Vietnam’s exports.