A closer look at exports and oil

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I was reading an email from CSIS, which has a great Southeast Asia program. It was discussing the economic impact of COVID-19. There are a few interesting things in there.

First, it had a table that showed estimates for economic growth in 2020 by the IMF, the ADB and the World Bank. There is a wide range, especially for Vietnam, which could see growth as low as 1.5% or as high as 4.9% (both of those are scenarios by the WB). The ADB looks for 4.8% (as we mentioned the other day), and the IMF pencils in 2.7%, basically a bit below the average of the WB’s scenarios. Both the IMF and ADB have a return to growth in 2021 with 7.0% and 6.8% estimates, respectively.

Second, Dr. Searlight highlighted this important fact that both Malaysia and Indonesia depend heavily on oil exports. Fuel exports make up 15% of Malaysia’s merchandise exports and 23% of Indonesia’s.

I starting thinking about second order effects from that, and these stats stuck out:

Source: Vietnamese customs, World Bank. Data on exports represent 2019. Data on fuel exports represent 2018 figures except for Saudi and Iraq. These are 2016 figures

Source: Vietnamese customs, World Bank. Data on exports represent 2019. Data on fuel exports represent 2018 figures except for Saudi and Iraq. These are 2016 figures

  • Vietnam's oil exports make up 3.5% of the budget (I read this but can’t find the source right now) in 2019. In 2018, it was estimated to be 4.6%.

  • Oil and oil products made up around 2% of total merchandise exports in 2019.

  • Many countries that buy Vietnamese products are heavily dependent on oil exports. I went through and found 20 countries that get more than 10% of their exports from oil. I think we can assume that the percentage of their budget funded by these exports is at least similar, if not higher (meaning fuel exports make up 77% of Saudi Arabia’s merchandise exports but more than 90% of its state budget).

  • In total, 13% of Vietnam’s exports go to countries where fuel is 10% or more of exports.

  • If we tighten this up a bit, 4% of Vietnam’s exports go to countries where fuel is the majority of their exports.

Source: Vietnamese customs, World Bank. Data on exports represent 2019. Data on fuel exports represent 2018 figures.

Source: Vietnamese customs, World Bank. Data on exports represent 2019. Data on fuel exports represent 2018 figures.

There were some surprising findings here for me. Canada and India have a large percentage of fuel exports (25% and 15%). Australia is high at 24%. Brazil is a bigger trading partner with Vietnam than I expected - Vietnam exported $2.1bn worth of goods there.

The big worries are Indonesia and Malaysia, where trade is high and they depend on fuel exports (although both are less than 25% of total exports). Canada and Russia also import a lot from Vietnam - these lanes might start to shrink. The UAE is mainly a re-exporter, so its hard to say what will happen to it. I could see trade there falling off a fair amount, especially because some of its goods go to other fuel exporting nations. And Australia.

But overall, the decline in oil prices shouldn’t have massive effects on Vietnam’s economy. Plus, some of these exports will remain even in a downturn, because Vietnam generally produces lower-priced goods. Finally, remember that Samsung alone makes up a quarter of Vietnam’s exports - so it really depends on what happens with the company’s products.