Vietnam’s trade outlook for the second half of this year is set to stay positive, thanks to a number of free trade agreements (FTAs) that the country is a part of and growing prices of export products on the global market.

The Ministry of Industry and Trade (MoIT) made the forecast in its latest report on Vietnam’s trade performance in 2021.

Data: GSO. Chart: Hai Yen

“The fact that the US and European countries are gradually removing Covid-19 restrictions in line with fast progress in vaccination rollout and a recovery in global consumption demand would be an opportunity for Vietnam to boost exports of key industrial and consumer products,” noted the MoIT.

In June, Vietnam posted an export turnover of US$26.5 billion and imports of $27.5 billion, which resulted in a trade deficit of $1 billion. This marked the second consecutive month that the country’s trade balance stayed negative.

For the first six months of this year, Vietnam recorded a trade deficit of $1.47 billion, staying in stark contrast with a surplus of US$5.86 billion in the same period of last year.

According to the MoIT, the negative trade balance was mainly due to a trade deficit of $15 billion from the domestic-invested sector, while foreign-invested companies gained a surplus of $13.64 billion during the period.

The ministry, however, argued trade deficit in the first half of 2021 reflected the growing demand of domestic firms for input materials from abroad as they look to expand production after three Covid-19 outbreaks.

A corner of Hai Phong Port. Photo: Cong Hung

“Even in the pre-Covid-19 period, local firms tend to import input materials at the beginning of the year and reduce the amount as the year goes on,” it noted, saying exports are expected to reach its peak by the final half of the year.

“Global demand for Vietnam’s exports would continue to rise in the remaining six months, especially for electronics, machinery, wooden products, garment, and seafood, in turn improving the trade balance,” stated the MoIT.

The MoIT suggested trading activities would continue to be under pressure from the current fourth Covid-19 outbreak, especially in major production and economic centers such as Bac Giang, Bac Ninh, Ho Chi Minh City, Dong Nai, and Binh Duong.

Meanwhile, export turnover in the first six-month period was higher than the same figure recorded last year, with improvements spreading evenly in major sectors of electronics, textile, footwear, machinery, seafood, to markets such as the US, EU, and China.

During the period, exports of machinery and equipment rose by 63% year-on-year to $17 billion, followed by textile and garment ($15.2 billion or 15% increase), and footwear ($10.4 billion and 28%).

The US continued to be Vietnam’s largest export market with a turnover of $45 billion, and China ($24.6 billion) came in second and the EU ($19.3 billion) in third place.

In return, China is Vietnam’s largest import market for US$54 billion, along with South Korea ($25.2 billion), and ASEAN ($21 billion).