Vietnam: January 2019 trade


HIGHLIGHTS

January 2019 trade

  • Vietnam recorded a trade surplus of US$816m in January 19 (vs. trade deficit of US$811m in December 18). GSO had estimated a US$800m trade deficit in January 19.
  • Continued downtrend in smartphone and electronics exports seen in January 19.
  • We expect a softer export outlook in 2019F (+12.0% yoy vs. 13.1% in 2018).

Trade surplus of US$816m in January 2019
In January 2019, exports grew 8.9% yoy (vs. -0.4% in December 2018) while imports grew 5.4% yoy (vs. 1.6% in December 18). As a result, Vietnam’s trade balance registered a surplus of US$816m in January 19 (vs. a deficit of US$811m in December 18). The General Statistics Office (GSO) had previously estimated a trade deficit of US$800m for January 19. FDI exports recovered in January with a growth of 5.0% yoy (vs. -5.2% in December). However, growth was much lower than the same period last year (+41.4% yoy in January 18) due to a high-base effect and a sharp drop in electronic products exports (-10.7% yoy in January 19).

Continued downtrend in smartphone and electronics exports
Exports of top electronic products decreased by 10.7% yoy in January 19 (vs. an 11.9% increase in December 18), led by a contraction in shipments of smartphones (-16.4% in January vs. -26.2% in December) and cameras (-15.8% in January vs. -8.7% in December). Exports of other segments, such as computers, PCs and electronics parts, were nearly unchanged compared to the same period in January 18. Subdued demand for smartphones and consumer electronics, underscored by Samsung’s guidance for challenging market conditions in 1H19F, is likely to curtail Vietnam’s exports in the near term.

Expansion of domestic sector’s exports
Despite a slowdown in FDI exports, the domestic sector performed better than expected with an export growth of 17.8% yoy in January (vs. 10.3% in December). This came on the heels of robust export growth of textiles, handbags and wooden products. Export data breakdown by domestic sector showed that textiles and handbags grew at 36.6% yoy while wooden products grew at 23.5% yoy in January. However, exports of agricultural products declined by 7.7% yoy, led by weakness in cashew, coffee and rice exports.

Rebound in capital goods imports
Machinery equipment import growth has remained in the red for 10 months since Feb 18, but there was a rebound in January 19 with a rise of 18.1% yoy. It is still too early to conclude if a recovery in capital goods imports could boost exports growth, but this is a good sign that investment is continuing to grow amid trade war uncertainties. In January 19, disbursed FDI surged by 47.6% yoy to US$1.6bn, suggesting continued strength in FDI flows

We expect a softer export outlook for 2019
We retain our forecast of low double-digit export growth (+12.0% yoy in 2019F vs. 13.1% in 2018). Despite an uncertain global trade outlook, we think the trade negotiations between the US and China create provide some glimmer of light at the end of the tunnel. Therefore, we do not see the trade war as a major risk. Instead, we think a slowdown in China and moderation in global growth will have a bigger impact on Vietnam’s export performance.

Originally published by CIMB Research and Economics on 22 February 2019.