Industrial production on back foot
Industrial production on back foot
Vietnam’s industrial production remains challenged despite signals of recovery in August, while a decline in business confidence means it may be a stretch to hit government-set goals.
Since April, Nguyen Tran Chuyen, an engineer previously working for a Japanese electronics company, has been seeking employment from a number of other companies in Hanoi because his old company cut 200 staff.
“The company is reducing production due to a decline in export orders from Japan and Europe. Its leadership said they hoped to have us in work again if the company’s performance improved,” Chuyen said.
Currently, many unemployed staff like Chuyen are looking for new jobs at other companies in Hanoi. Nghiem Xuan Hai, an engineer who used to work with Chuyen said, “The new school year has begun for our two kids. Life has become increasingly difficult, but now we cannot find another job as many companies are struggling.”
Pham Thi Mai, an accountant from China’s Hai Yun Investment and Trading Co., Ltd. in the northern province of Hung Yen, is also worried about her job.
“The company’s accountancy division has 13 staff, and three have been cut, and I don’t know when I will face the same plight. The company is not operating well due to difficulties in input materials and outlets,” Mai said. “The company has employed 300 workers, but many have been temporarily let go.”
According to the General Statistics Office (GSO), Vietnam’s index for industrial production (IIP) in August climbed 2.9 per cent on-month and 2.6 per cent on-year – which the GSO said was “more positive” than the rates recorded in the previous month.
Nevertheless, the GSO also said that poor performance of many enterprises and the global grey economic situation had resulted in an on-year drop of 0.4 per cent in the IIP in the first eight months of 2023.
The eight-month IIP for processing and manufacturing, which creates more than 80 per cent of industrial growth, reduced 0.6 per cent as compared to the same period last year its IIP went up by 10.1 per cent on-year.
The IIP of the industry of water supply and waste management and treatment expanded 4.8 per cent, and the mining industry declined 2.5 per cent on-year. Meanwhile, the IIP in electricity production and distribution increased only 1.7 per cent on-year.
Vietnam Electricity reported that in the first seven months of this year, the total produced electricity volume was estimated to hit 161.8 billion kWh, up only 2.69 per cent as compared to the same period last year, and lower than the annual plan by 862 million kWh.
It also reported that this year, it is expected that the group would continue facing increased difficulties in production and business activities due to a very high climb in assorted input materials.
For example, the price of imported coal is set to increase 2.32 times as compared to 2021, and 5.3 times over 2020; while the oil price is expected to increase by 1.22 times against 2021 and 2.06 times as compared to 2020.
What is more, the exchange rate in 2023 is also forecast to stay higher than the average level of 2022 – affecting the group’s performance.
According to the GSO, since early this year, business confidence in general seems not to improve due to lingering difficulties. For instance, in August, nearly 5,200 enterprises suspended operations, up 40 per cent on-year. Another 5,200 waited for completing dissolution procedures, up 17 per cent on-year.
In the first eight months of this year, Vietnam saw 103,700 newly established businesses registered at $40.9 billion, using nearly 669,000 workers. This was up by 2.3 per cent in the number of enterprises but down by 14.7 per cent in registered capital and down by 3.9 per cent in the number of employees – as compared to the same period last year.
If another $53.74 billion registered by 32,300 operational enterprises is included, the total capital supplemented into the economy in the period stood at $94.65 billion – down by 38.3 per cent on-year.
Meanwhile, the first eight months also saw 71,800 businesses with halted operations – up 20.5 per cent as compared to the corresponding period last year; 41,100 enterprises stopped operations and waited for dissolution procedures – up 26.7 per cent; and 11,800 enterprises completed such procedures. On average, about 15,600 businesses were kicked off from the market every month.
The government is expecting the economy to grow 6.5 per cent this year, but difficulties in industrial production are expected to dent this goal, according to the World Bank, which forecasts a moderate growth of 4.7 per cent in 2023, gradually accelerating to 5.5 per cent in 2024 and 6 per cent in 2025.
“Vietnam’s economy is being tested by internal and external factors. To boost economic growth, the government can support aggregate demand through effective public investments, thereby creating jobs, and stimulating economic activity,” said Carolyn Turk, World Bank country director for Vietnam.
“Beyond short-term support measures, the government should not lose sight of structural institutional reforms – including in the energy and banking sectors – as they are imperative for long-term growth.”
