How economy surpasses expectations with 6.42% growth in H1

By Phuong Dung, Vien Thong   July 4, 2024 | 03:53 pm PT
How economy surpasses expectations with 6.42% growth in H1
A container ship is seen at Tan Vu Port in Hai Phong City in July 2023. Photo by VnExpress/Giang Huy
The economy grew by 6.93% in the second quarter, taking half-yearly growth to 6.42%, surpassing all forecasts and giving businesses confidence a strong recovery is in the offing.

Ho Chi Minh City-based garment company Dony saw a "turnaround" in its business in the first half with a surge in orders. "There are so many orders that it sounds almost unimaginable", CEO Pham Quang Anh said.

He even had to turn down three orders since his workers were already overwhelmed and working overtime.

Dony will be running at full capacity through the third quarter and orders for the last three months of the year are being negotiated, he said. "If there are no unexpected difficulties, the company will likely have a successful year."

Cao Huu Hieu, CEO of Vietnam National Textile and Garment Group (Vinatex), said the situation has now improved for most companies. His company has orders for until October end and is negotiating new ones, he said.

The chief of another major garment firm, who asked not be identified, said it has been more than two years since orders grew so sharply.

His employees are working more than two hours extra every weekday, he added.

Vietnam’s exports rose by 14.5% year-on-year to US$190 billion in the first half as global demand recovered, according to the General Statistics Office.

Exports partly contributed to the country’s 6.93% GDP growth in the second quarter, the second highest rate in the last five years.

Singaporean lender UOB had forecast 6% growth for the quarter. Even the government’s economic advisors had only expected 6% growth.

Nguyen Thi Huong, head of the General Statistics Office, said major markets are buying more Vietnamese goods and large companies have received new orders, boosting manufacturing.

Retailers are also seeing growth. Electronics retailer Mobile World expects a 58% rise in profits in the second quarter and a 53% increase for the year to VND540 billion ($21 million), 10% higher than the target.

Industrial production grew by 7.53% in the first six months while public investment and foreign direct investment also rose.

But some businesses are worried that the jump in orders will be short-lived.

Anh said his customers are only signing short-term deals and not.

"Our partners are running out of inventories and they need a quick refill. They are unable to confirm whether there will be more orders".

Most orders are from existing buyers and at last year’s prices, he added.

Hieu said garment prices had plummeted by 30% last year, and even 50% at times, which means companies now have a hard time negotiating prices.

Increasing logistic costs and delay in imports of feedstock due to geopolitical tensions are other challenges, he added.

Phi Thi Huong Nga, head of the General Statistics Office’s department of industry and construction statistics, said domestic demand is low while competition is high.

Nguyen Quoc Viet, deputy head of the Vietnam Institute for Economic and Policy Research, said low credit growth and high bank deposits show that consumers are reluctant to spend amid the economic uncertainty. "As consumers and businesses cut spending, it is difficult for producers to sell."

The latter also face great competition from the flood of cheap imports through e-commerce platforms, he added.

Vu Lan Chi, founder of a fashion brand, this month has decided to shut down her company due to low sales. "Consumers are tightening their spending and only buying essential items."

The National Assembly, seized of the situation, recently approved the extension of the 2% cut in value-added tax until year-end to boost consumer spending.

Nguyen Duc Hung Linh, founder of the think tank Think Future, said domestic companies’ low participation in foreign-owned companies’ supply chains is part of the reasons why they lack competitiveness.

The foreign companies often export high-value products such as electronics and smartphones while the domestic ones export low-value products such as seafood, garments and wooden furniture, he said.

The government needs to prioritize and protect the latter to bolster their competitiveness, he added.

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