According to a recent report by the “Vietnam Economic Review”, Vietnam’s order shortage continues at the end of 2022, causing many southern companies to continue to reduce production scale, lay off employees, and shorten working hours. At present, more than 7,500 enterprises have registered to suspend operations within a time limit, suspend operations pending dissolution, and have completed dissolution procedures.
The latest data released by the General Statistics Office of Vietnam (GSO) also confirms this. Vietnam’s economic growth slowed to 3.32% in the first quarter of this year, while the growth rate in the fourth quarter of 2022 was 5.92%. 3.32% is Vietnam’s second-lowest first-quarter figure in twelve years and is almost as severe as when the COVID-19 epidemic began three years ago.
Textile and footwear orders fell by 70% to 80% in the first quarter, said Tran Thi Thu, deputy director of the GSO’s general accounts statistics department.
Textile, footwear and other companies are struggling
In March this year, Vietnam’s largest shoe factory, Bao Yuan, submitted a document to the relevant departments regarding the implementation of an agreement to terminate the labor contracts with nearly 2,400 workers due to difficulties with orders. A large company that could not recruit enough workers before is now laying off a large number of employees. This shows that companies in the leather, footwear, and textile industries are really struggling.
Starting from March 31, TW MTC’s 800-employee sole processing workshop located in Bien Hoa 2 Industrial Zone, Dong Nai Province, will suspend production due to lack of orders.
The company encourages employees to resign, and has policies to support employees with less than 20 years of service being paid half a month’s salary every year, and employees with more than 20 years of service being paid one month’s salary every year. If employees want to continue working, they can move to another branch.
It is a huge effort for businesses to maintain a workforce or a significant portion of their permanent workforce during these difficult times. Selective recruitment, reasonable shift scheduling, and equal division of labor… are the ways many companies retain employees.
Exports of electronic products fell by more than 10% in the first three months
In fact, not only did orders for textiles and footwear drop in Vietnam in the first quarter, shipments of electronic products also fell by 10.9% year-on-year.
Vietnam’s most important exported processed products are electronic products, with export volume ranking 12th in the world, including mobile phone exports ranking 2nd in the world. Data show that from January to March, smartphone shipments in the first quarter fell 15% year-on-year, and exports fell to US$13 billion.
This has also led to a decline in Vietnam’s overall exports. Data show that overseas sales shrank by 14.8% year-on-year in March, while from January to March, Vietnam’s overall exports fell by 11.9% year-on-year. This is a far cry from last year.
GSO stated that the global economy is in a complex development process and full of uncertainties, hinting at the troubles caused by high global inflation and weak demand.
Slowing external demand has obvious impact
In fact, Vietnam’s exports have shown signs of slowdown since last year. Orders were strong in the first half of the year but sluggish in the second half, a feeling shared by many companies. In the fourth quarter of 2022, orders from many Vietnamese companies have shrunk, residents’ unemployment rate has increased again, the growth rate of the secondary industry has slowed to 4.22%, and the overall economic growth has slowed down to 5.92%.
Xu Liping, a researcher at the Institute of Asia-Pacific and Global Strategy of the Chinese Academy of Social Sciences and director of the Southeast Asia Research Center, pointed out that the overall growth prospects of most economies such as Europe and the United States are unclear, external demand has slowed, some Vietnamese companies cannot operate at full capacity, and the unemployment rate has increased. The global downturn has had a great inhibitory effect on Vietnam’s economic development.
The World Bank also pointed out in a report that economies like Vietnam that rely on commodities and exports are particularly vulnerable to a slowdown in external demand.
Sluggish external demand is one aspect. Xu Liping pointed out that the more fundamental reason for Vietnam’s economic weakness is that the transformation and upgrading of Vietnam’s manufacturing industry has been lower than expected and failed to achieve substantial breakthroughs and leaps. As a result, the development momentum of Vietnam’s industrial sector has also failed to further improve.
According to Capital Economics, Vietnam’s economic activity is expected to remain weak this year, given the challenging external environment and the lagging impact of monetary tightening policies. It added that this makes their forecast for Vietnam’s GDP growth rate this year even less optimistic, which may be less than 5%.
Regarding this year’s prospects, Xu Liping said that in order to effectively deal with risks, strengthening cooperation with China is undoubtedly the “optimal solution.”
Take food imports as an example. According to Vietnam Express, in the first two months of 2023, China purchased US$1.27 billion worth of agricultural products, seafood and forestry products from Vietnam, ranking first among all countries and accounting for 1/5 of Vietnam’s agricultural exports. above. Dang Phuc Yuan, secretary-general of the Vietnam Fruit and Vegetable Association, said that the restoration of border trade between the two countries and the new trade agreement will help promote the export of Vietnamese agricultural products to China.
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