After facing tremendous difficulties in the first half of 2023, the economy has started the second half of with more positive developments, with a highlight being a rise in industrial production.
“Thanks to positive and synchronous solutions used to remove difficulties for production and exports, the industrial production in July has witnessed positive signals,” said the Ministry of Industry and Trade (MoIT) last week.
|Signs are up for industrial production and services, illustration photo/ Source: freepik.com
The General Statistics Office (GSO) also stated that industrial production in July was “much better” than the previous month.
The index of industrial production (IIP) in July not only expanded 3.9 per cent on-month, but also ascended 3.7 per cent on-year. Particularly, the IIP in July has bounced back strongly in many localities. For example, in the northern province of Bac Ninh where Samsung’s factories are situated, the IIP in the month expanded by 23.8 per cent on-month, after suffering a consecutive reduction in the first months of the year. This was one of the big reasons for Bac Ninh’s negative growth of 12.59 per cent, with the province ranked at the bottom of the ranking for regional GDP growth in the first half of the year.
Many other industrial production hubs in Vietnam also enjoyed a positive IIP increase in July, such as Thai Nguyen (9 per cent), Vinh Phuc (5.8 per cent), and Binh Duong (2.3 per cent). In the first seven months of this year, the on-year IIP has ascended in 49 localities and decreased in 14 localities throughout the country.
Industrial production is also seemingly moving in the right direction, meaning more positive domestic consumption and exports.
Since early this year Viet Phap Aluminum JSC in Hanoi’s Tu Liem Industrial Park has focused on boosting exports, with its existing 40 per cent of output exported. “The domestic and foreign markets have gradually begun to recover. Our orders have increased and our employees have sufficient employment, not having to work in moderation as before,” said chairman Vu Van Phu.
According to the MoIT, production of many products like aluminium, steel, and electronics begun to recover in July at the respective rates of 5, 3.1, and 32 per cent on-year.
Meanwhile, the import turnover in July is estimated to have reached $27.53 billion, up 4.4 per cent on-month. In which the turnover of Vietnamese companies hit $10.73 billion, up 143 per cent, and that of foreign companies touched $16.8 billion, down 1 per cent. About more than 90 per cent of Vietnam’s import items are used for production.
“Materials are a very important input for production. Their increase mean a positive signal for the recovery of domestic production and the whole economy in general,” said Nguyen Duc Tiep, an economic expert from Ha Long University.
Data from the GSO has also shown that the economy’s export turnover of goods in July is estimated at $29.68 billion, up 0.8 per cent compared to the previous month. Meanwhile, attracting foreign direct investment for the first time so far in the year climbed by 4.5 per cent over the same period last year, reaching nearly $16.24 billion.
This is deemed consistent with the data on the Purchasing Managers’ Index (PMI) for Vietnam’s manufacturing industry that S&P Global has released. Vietnam’s PMI rose to 48.7 points in July, from 46.2 points in June. Although the number remains below 50 points, it still shows manufacturing conditions still declining for the fifth consecutive month, but this drop was the smallest in this period.
Also according to the MoIT, while the rebound in industrial production is quite mild, one of the main drivers of the economy’s growth consists in the service and tourism sector.
Cumulatively in the first seven months of this year, the number of international visitor arrivals to Vietnam are estimated at more than 6.6 million, which is 6.9 times higher than the figure recorded in the corresponding period last year.
Minh Phuc Travel JSC in Hanoi, which specialises in inbound tourism services for French tourists, reported that it has landed a total of seven big contracts since early this year.
“There has been a rise in French tourists into Vietnam, coupled with a rise in spending. Our revenue from travelling services has climbed about 15 per cent on-year in the first seven months, which is 5 per cent higher than that in the same period last year,” said director Nguyen Van Tuan.
The GSO reported that besides the exciting domestic tourism activities in the peak season, the revenue of accommodation and food services so far this year is estimated at $15.72 billion, accounting for 10.7 per cent of the total retail sales of goods and consumption service revenues, and up 16.3 per cent over the corresponding period last year. Revenues from travel services are estimated at $775 million, or 0.5 per cent of total retail sales of goods and consumption service revenues, and up 53.6 per cent on-year.
After underperforming in Q1, the economy picked up speed on-year in Q2. An acceleration in agricultural activity and a rebound in industrial production more than offset a moderation in services growth. Moreover, lower inflation, a cut in the VAT and lower interest rates likely supported private consumption over the quarter.
Turning to Q3, our panellists expect a further acceleration in annual growth, which will likely be buoyed by a more supportive monetary policy environment.
After the central bank cut rates in Q2, Prime Minister Pham Minh Chinh called for additional policy easing on fears of missing the 6.5 per cent 2023 growth target - a concern that is justified by our consensus. Indeed, our panel expects 50 basis points of further cuts in Q3. However, power shortages caused by unusually hot weather will weigh on activity.
Growth will slow this year as weaker momentum in private spending and exports weighs on output. Moreover, power shortages will restrict activity. That said, stronger public spending and lower interest rates will support growth, with Vietnam set to remain among ASEAN’s top performers.
Factories relocating and the impact of China’s recovery are key factors to watch. Our panellists see GDP expanding 5 per cent in 2023 and 6.4 per cent in 2024.Source: FocusEconomics
|Index of industrial production enjoys impressive growth
The index of industrial production (IIP) in the first 11 months of 2022 is estimated to increase by 8.6 per cent year-on-year, doubling the 4.2 per cent of the same period last year.
|Thai Nguyen offering industrial nous
Despite facing myriad hardships, the northern province of Thai Nguyen bagged upbeat signs in industrial production in July, showing the commitment and efficiency of local management in weathering stormy times.