HSBC: Vietnam’s Exports Rose Sharply Thanks to Broad-based Growth across Sectors

Photo Credit: Bloomberg

Today, HSBC released the March’s economic report under the title “Vietnam at a glance : Old engine, new vitality”. Followings are some main points:

Vietnam’s external sector continued to shine in February while consistent FDI is set to add future production capacity

But petroleum imports have jumped amid a surge in global energy prices and a shortage in domestic supply

Despite favourable base effects, energy-induced inflation risks warrant being watched by policymakers

Take the driving seat: In the new year of the Tiger, Vietnam’s exports point to a steady recovery.

Exports rose 13.6% y-o-y in February thanks to broad-based growth across sectors – a reflection of its steaming external sector. That said, the only downside surprise came from electronics as Samsung’s smartphone release typically provides a significant boost to Vietnam’s exports.

Scheduled for late February, Samsung’s flagship Galaxy S22 appears to face a delay in its shipments. However, the impact is likely to be temporary, and there are good reasons to stay optimistic on Vietnam’s external engine.

Thanks to multi-year consistent FDI inflows in tech manufacturing, Vietnam has successfully transformed into a rising global base. While the pandemic partially disrupted the process, interests remain high. For example, Samsung has recently injected USD920m to expand its mobile component production in Thai Nguyen province.

Energy crunch: Given surging global oil prices, the impact on Vietnam’s trade is noticeable. While base effects and import-intensive electronics were the main reasons behind strong import growth, February

petroleum imports almost doubled that of the monthly average for 2021. The trend will likely continue as the authorities indicated that Vietnam will import an additional 2.4m cubic meters of petroleum products in 2Q22. This is because Vietnam has been facing a domestic petroleum supply shortage after its largest refiner Nghi Son Refinery, reduced its production capacity to 80% and suspended some crude imports since January. In addition to increasing imports, the government also plans to auction 100m litres of gasoline from its reserves.

Persistent energy inflation: No doubt, the most direct transmission on surging energy prices falls on consumer prices. Inflation rose 1.4% y-o-y in February, primarily driven by higher transports costs of over 15% y-o-y, a trend that has been lasting for a while. Indeed, gasoline prices have been raised six consecutive times since early December. That said, low base effects partly alleviated some acute short-

term challenges. Still, inflation risks worth watching closely by policymakers as the rise in commodity prices is broad based, not only about energy.