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Vietnam’s Economy, November 2023: Snapshot

Vietnam started November with state media boasting that the country had overtaken South Korea to become the 6th biggest trading partner of the US by import value. This was, however, on closer inspection, old news with the jump actually taking place in 2022. That’s not to say this report was without value, but rather than big-up the local economy, it served to elucidate just how challenging it can be to get a clear picture of the economy using local news sources.

That said, there were more accurate and timely good news stories in November.

The e-Conomy SEA 2023 report, compiled by Google,Temasek Holdings, and Bain & Company, for example, showed that whereas growth in the economy broadly may have slowed, Vietnam’s digital economy was booming suggesting it could more than triple in size by 2030.

But that is not to say the whole tech sector was benefitting with a Top Dev survey finding a wave of layoffs in Vietnam’s technology sector was part of a reduction in tech firms’ workforces broadly–Up to 90 percent of tech companies that participated in the study were looking to recruit less than 50 programmers over the next year.

That said, wages in the sector were reportedly rising. Aon’s 2023 Salary Increase and Turnover Report suggested wages on the whole could rise as much as 8 percent next year, with wages in Vietnam’s tech sector alone expected to rise 10.9 percent.

Wages to the side, a number of challenges were also raised with respect to Vietnam’s labour market. Germany Trade and Invest, for example, in its World Business Outlook Fall 2023 report, found that a lack of skilled labour was a key concern for German investors in Vietnam.

On that note, Vietnam came in at just 75 in the 2023 Global Talent Competitiveness Index placing it between Mexico at number 74 and Mongolia at 76. This was also in line with unnamed ‘experts’ in the local press calling for a comprehensive investment strategy to encourage university students to enrol in STEM subjects.

Government spending, however, was also revealed to be facing some challenges with personal income tax receipts down year-on-year. Furthermore, recognising the challenges facing the economy, a value-added tax reduction of 2 percent was extended to the end of June 2024. Good news for consumers and businesses but dealing another blow to the state coffers.

That said, countering these losses was news that a top-up tax in response to the Global Minimum Tax had finally been approved by Vietnam’s National Assembly. There would, however, be no legislation that might provide impacted firms with alternative benefits as had been promised. In this light, the government could theoretically have as much as an additional US$600 million to play with in 2024.

Taxes aside, trade was also a point of contention in November with two of Vietnam’s biggest trading partners, the US and the EU, raising concerns about Vietnam’s trade practices.

For the EU it was concerns about Chinese electric bike makers exporting their products through Vietnam to the EU to avoid anti-dumping duties.

For the US it was Vietnam’s trade surplus of 4.7 percent of its GDP. This was a breach of the 3 percent limit over which a country finds itself on a currency manipulator watchlist administered by the US Treasury–a list Vietnam had been removed from this time last year but has now been put back on.

That said, concerns were also raised at home about Vietnam’s record high trade surplus. An article in VN Express noted that in the past year manufacturers had been burning through stockpiles of raw materials rather than importing more. In this context, with imports still down, Vietnam’s exporting enterprises in the immediate future, it was suggested, could still be facing some challenges.

Furthermore, CNN reported that consumer spending in the US could be headed for a dive on the back of high housing costs and huge levels of debt, along with consumers running out of their COVID-era savings. As Vietnam’s biggest export market this could be a problem coming down the pipeline, too.

Also of note, it was revealed in November that the challenges facing exporters in Vietnam were not evenly spread–whereas foreign invested enterprises recorded a trade surplus of US$43.49 billion from January to November 15, Vietnamese firms recorded a deficit over the same period of US$19.05 billion. 

Moreover,foreign direct investment approvals hit US$28.85 billion over the 11 months preceding November 20–higher than the US$27.72 the country pulled-in in all of 2022.

This may be set to expand next year as well with the announcement that Vietnam had completed its Just Energy Transition Partnership (JETP) agreement roadmap to be revealed at COP28. No details were provided but last year, when Vietnam signed on to be a part of the JETP initiative, US$15.5 billion in funds was on the table.

Finally, it was revealed that the Ho Chi Minh City Football Club had failed to pay staff and players to the tune of US$1.23 million. At first glance this might seem somewhat innocuous but it gives rise to the notion that the economic challenges facing the country are not concentrated but rather vast and infiltrating all sectors of the economy, including the national pastime.

With all of this in mind, moving into December and into the holiday season–first Christmas in the West and then the Lunar New Year in Vietnam–the mood is somewhat muted. December and January have historically been the quietest time of the year for exporters, however, they are the busiest months of the year for consumers. What happens in the next two months, therefore, should provide key insights into where Vietnam’s economy is currently at and how it might perform in 2024.

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