Vietnam trade surplus predicted to reach all-time high of US$10 billion in 2019

Vietnam’s trade surplus in 2019 is likely to reach over US$10 billion, marking an all-time high in the country’s trade history, according to Viet Dragon Securities Company (VDSC).

Statistics from the General Department of Vietnam Customs (GDVC) revealed in the January – November period, the country’s external trade volume hit US$472.36 billion, up 7.3% compared to the same period in 2018. Upon breaking down, exports totaled US$241.65 billion, up 7.9% year-on-year, and imports reached US$230.71 billion, representing an increase of 6.6%.

Vietnam's trade growth. Unit: % year-on-year.

This resulted in a record high trade surplus of US$10.94 billion in the first 11 months of 2019, higher than a surplus of US$9.01 billion recorded one month earlier. Notably, an increase of nearly US$2 billion in trade surplus in November helped boost the foreign exchange reserves to over US$73 billion.

Vietnam's trade balance. Unit: billion USD.

Export growth recovered from 1.9% year-on-year in February to 8.8% year-on-year in September before slowing down in the last recent two months. Domestic corporations’ overseas revenue grew at an annual pace of 18.2%, the highest growth rate since last February, and reached US$77 billion to date. Industries such as ores, chemicals, plastics, bamboo products, wood and toys recorded healthy growth rates which were three times as high as they were in 2014-2018 on average.

Meanwhile, import growth tripled from 4.1% year-on-year in early 2019 to 12% year-on-year in June.

Data: GDVC. Chart: Ngoc Thuy.

Domestic buyers spent US$98.5 billion to date on imported goods, up 14.2% year-on-year, while FDI companies purchased US$133 billion of goods, up 3.3% year-on-year. In the first half of 2019, car imports saw a fourfold increase. There was a huge demand for imported machines for solar power projects which were put into operation by the end of June 2019.

In 2019, the import of coal and crude oil also climbed up to fulfill the demand of thermal power generators and refinery factories.

Exports to the US, Vietnam’s largest export market, were, year-to-date, estimated at US$55.6 billion, up 27.9% year-on-year, while exports revenue from the EU market dropped 2.3% year-on-year.

In general, Vietnam faces an issue as it now the seventh largest trade surplus with the US while Vietnam’s trade deficit with China increased by two-digit rates, leading to a growing concern over illegal transshipment of goods from China to Vietnam. 

On December 16, the US Commerce Department said it had issued a final order imposing duties of up to 456% on certain steel products from South Korea or Taiwan (China) that are shipped to Vietnam for minor processing and then exported to the US.

According to VDSC, this will put pressure on Vietnam to diversify its trade partners and the EU with the upcoming EU – Vietnam Free Trade Agreement (EVFTA) is the most promising one.

In February 2020, the trade agreement is scheduled to be discussed in the EU Parliament. It is expected the EVFTA will be ratified in mid-2020 and become effective from early 2021.

In 2020, Vietnam’s trade surplus is expected to be US$8.6 billion, stated the VDSC.