EuroCham Vietnam Chairman Gabor Fluit: To maintain the growth momentum of production, Vietnam needs to continue focusing on innovation, building stronger trade relations with key export markets, and increasing export value through processing.
According to S&P Global Market Intelligence, Vietnam’s Purchasing Managers’ Index (PMI) for the manufacturing sector recorded a rebound at the beginning of 2024, due to improved economic conditions leading to an increase in new orders.
In the first month of 2024, Vietnam’s PMI returned above the 50-point threshold, reaching 50.3 points compared to 48.9 points in December. The growth rate may not be high, but it is enough to indicate that the manufacturing sector has improved after 5 months.
The recovery of domestic and export markets is a key factor in the increased number of orders. Manufacturers are optimistic about the prospects for production growth in 2024, with hopes that demand will further improve.
Commenting on the positive developments in Vietnam’s manufacturing sector in the first month of the year, Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “This is an encouraging start to 2024 for Vietnam’s manufacturing sector as new orders and output show positive improvements. However, the corresponding increase is only modest and not enough to persuade companies to hire more employees or increase purchasing activities.”
According to Andrew Harker, in Vietnam’s manufacturing sector, the growth in output is mainly focused on intermediate goods manufacturers. In particular, purchased inventories have decreased the most since June last year. “However, the growth rate is only modest, so it is still too early to say whether this indicates a sustainable recovery of growth,” Andrew Harker commented.
This result signals the promising development of Vietnam’s manufacturing and exporting industry, demonstrating that Vietnamese businesses are preparing to compete more effectively on a global scale.
Recovering from Europe
Sharing the same view with Andrew Harker, Gabor Fluit, Chairman of the European Chamber of Commerce in Vietnam (EuroCham Vietnam), believes that Vietnam’s manufacturing industry is preparing to meet the increasing demand of the global market, especially from key export markets such as Europe.
Gabor Fluit predicts that in 2024, demand from the European market will significantly improve as the economy of this region improves compared to recent years. This is a positive sign, reflecting the gradual recovery of Europe, one of Vietnam’s largest export markets.
However, Gabor Fluit advises Vietnamese export businesses to be well-prepared to meet the requirements of importers, such as the ability to recover and adapt, ready to cope with sudden changes in the global market in order to fully exploit the increasing demand from Europe.
In line with the optimistic signals from the report by S&P Global Market Intelligence and positive signs from the European market, Vietnam’s industrial production index in January showed significant improvement.
Positive signals about the “health” of the manufacturing industry
Recent data released by the General Statistics Office of Vietnam recorded positive signals about the “health” of the manufacturing industry. The industrial production index in January 2024 is estimated to increase by 18.3% compared to the same period in 2023. In particular, the manufacturing and processing sector increased by 19.3% compared to the same period, contributing 15.1 percentage points to the overall growth.
It is worth noting that the industrial production index in January 2024 increased in 60 localities and decreased in 3 localities across the country compared to the same period last year. Some localities have achieved significant increases in the IIP index due to the manufacturing and processing industry, as well as the electricity production and distribution sector.
According to the General Statistics Office, Vietnam has started importing more. Sharing with the media, Nguyen Viet Phong, Head of the Trade and Services Statistics Division (General Statistics Office), considered this as a “launchpad” for achieving significant export growth in 2024.
The total import-export turnover in January 2024 reached 64.22 billion USD, an increase of 37.7% compared to the same period last year (equivalent to an increase of 17.62 billion USD). Specifically, export reached 33.57 billion USD, an increase of 42%, and import reached 30.65 billion USD, an increase of 33.3% compared to the same period.
The import turnover of production materials reached 28.84 billion USD, accounting for 94.1%. There were three imported goods with a value of over 1 billion USD, accounting for 43.9% of the total import turnover.
Textile imports in January reached 1.2 billion USD, an increase of 28.2% compared to the same period. According to Gabor Fluit, this is a positive sign that Vietnam’s textile industry is experiencing significant growth. The import value for the production of electronic, computer, and component materials reached 8.25 billion USD, an increase of 25.7%. The import value for the production of machinery, equipment, and spare parts reached 4 billion USD, an increase of 46% compared to the same period.
“This clearly indicates that Vietnam’s economy is on the right track. To continue this growth momentum, Vietnam needs to continue focusing on innovation, building stronger trade relations with key export markets, and increasing export value through processing,” Gabor Fluit commented.
According to Gabor Fluit, the positive shift in Vietnam’s manufacturing industry is closely related to the significant growth in FDI inflows into Vietnam. With a growth rate of over 30% from 2022 to 2023, international investors are placing a big bet on the future of Vietnam. This partly explains the increase in imports of production materials.
“Vietnam’s economy is gearing up for future growth by increasing imports of production materials and paying attention to export opportunities in recovering markets such as Europe,” Gabor Fluit commented.
Vietnam is preparing to boost exports to Europe and capitalize on the increasingly strong relationship and Free Trade Agreement between Vietnam and the European Union.
Gabor Fluit believes that the bilateral trade turnover will soon reach 100 billion USD. To achieve this ambitious goal, Vietnam can and should maximize the opportunities that the trade agreement brings, address any emerging trade barriers, and ensure that products meet the highest quality standards.
Minh Quang
