Some good news — VietEcon

The markets in Vietnam were mixed, while the US is up (it started out shaky but is now up almost 4% - yesterday was up and then way down, so I guess we don’t know until the market is closed).

But outside of the markets, there is some positive news coming out of Vietnam:

First, the trade figures for the first two months of 2020 have come out, and exports are holding up pretty well. There is a bit of a trade deficit (almost $200m), but exports in February were actually up 26%, with the domestic sector up 30% and the FDI sector up 24%.

Out of the big items, these categories caught my eye:

Crude oil was especially high at +30% yoy.
Electronic goods rose 26.7%
Phones were up only 2.3%, but were up 22% in February. The total number was especially high at almost $7bn.
Textiles were disappointing, down 1.7% yoy.
Agriculture was mixed, with most products down (aquatic products: -17.7%), but rice surprised up 20.5%

Second, there continues to be a big trade deficit with the US market, with exports of $9.8bn in the first two months of 2020, up 19.6%. Unfortunately imports were just $2.1bn, up a good 13.6%, but not closing the difference.

I say unfortunately, because the US is pressuring Vietnam to lower its trade deficit, as I have written about a few times (in November and September).

Now the Vietnamese government is taking more direct measures, promising to buy $3bn in farm goods. It doesn’t really solve the underlying trade deficit. It wouldn’t even close the $7.1bn trade deficit from the first two months of this year. Plus, these agricultural purchases are over 2 years. For all of 2019, the trade deficit was $55.8bn. That’s a big number to deal with.

But I still feel that this is a helpful step. I was talking to someone working on a deal between a US company and a Vietnamese company, and that person told me that the Vietnamese government is starting to allow more things like these purchases and potentially capital investments into the US, (I assume as long as these are tied to future imports).

I ultimately think that as long as Vietnam makes the right soothing sounds, the US government will be placated, as will Trump. Just give him something positive to take credit for.

Third, it looks like stimulus is real, with $1.16bn (VND27tr) pledged in the form of tax breaks, delayed tax payments, and reduction in land lease fees. As I have said before, this is good, but it would be better if the government directly gave cash to companies affected so that they can keep employing people and to stave off bankruptcy.

The situation continues to be difficult, especially for companies in tourism: “According to the Vietnam National Administration of Tourism, the total number of international visitors in February was 1.24 million, down 37.7 per cent compared to the previous month and 21.8 per cent year-on-year.”

Finally, it looks like COVID-19 is under control, at least according to the government. All 16 people that tested positive for the virus have recovered. If there are no new cases for a week, the government will no longer consider it an epidemic. It’s now an issue in the US, with more cases cropping up every day. I wonder if Vietnam will stop allowing Americans to visit.