Vietnam Industry and Trade News Bulletin for AUGUST 01, 2023

A. GENERAL ECONOMIC NEWS & MACROECONOMIC OUTLOOK

1. Growth Forecasts and Inflation Trends

• Strong Growth Recovery: Vietnam’s economy is predicted to grow strongly in 2023, supported by four interest rate cuts within three months, bringing deposit rates down to approximately 7% and lending rates to 8-9%.

• CPI and Core Inflation: In July 2023, the Consumer Price Index (CPI) increased by 0.45% compared to the previous month, with a 7-month average increase of 3.12%. However, core inflation for the first 7 months rose by 4.65%, notably higher than the general CPI because price drops in petrol and gas are excluded from core inflation calculations.

• Economic Risks: While inflation is expected to remain below 4.5% for the year, risks persist due to high input material costs, potential electricity price hikes by EVN, and the impact of salary increases.

• Hanoi’s Performance: After 15 years of administrative expansion, Hanoi maintained a GRDP growth of 5.97% in the first half of 2023, a resilient figure despite global geopolitical and monetary tightening pressures.

2. Global Economic Signals

• China’s Recovery: Experts highlight strategic emerging industries in China—such as electric vehicles and solar energy—as foundations for long-term growth and digital innovation.

• AI M&A Boom: Global technology giants are aggressively acquiring AI startups to avoid falling behind in the “Generative AI” race, with notable deals including Databricks’ $1.3 billion acquisition of MosaicML.

B. INDUSTRY AND TRADE NEWS

I. ENERGY SECTOR

• Direct Power Purchase Agreement (DPPA): The Ministry of Industry and Trade (MoIT) has proposed a mechanism allowing renewable energy producers to sell electricity directly to large customers, including an option to use private transmission lines not managed by EVN.

• Rooftop Solar Policy: MoIT suggests that no additional financial incentives are needed for rooftop solar because the target of having 50% of homes and offices equipped by 2030 (2,600 MW) can be met even if only 12.5% of households install 1 kW systems.

• Regional Issues: Gia Lai province is requesting government guidance to resolve pricing obstacles for local wind and solar projects to facilitate their operation.

• Nuclear Energy Trends: China has approved 6 new nuclear power units, aiming to become the world leader in installed nuclear capacity by 2030.

II. IMPORT-EXPORT AND TRADE PROMOTION

• Export Challenges: Total export turnover for the first half of July 2023 reached $13.81 billion, a 12% decrease from the late June period, with sharp declines in phones, iron, and steel.

• Fraud in the UAE: Four Vietnamese agricultural exporters are at risk of losing nearly $400,000 due to trade fraud in the UAE; the Prime Minister has issued an urgent telegram calling for inter-ministerial intervention.

• Rice Market Shock: India’s immediate ban on non-basmati white rice exports (starting July 20) has sent global rice prices to an 11-year peak, causing a significant shock to international markets.

• Green Standards for EU: The textile, footwear, and leather industries are facing pressure to adapt to new green and sustainable standards set by the EU to maintain competitiveness.

• CPTPP Under-utilization: Despite high export growth to CPTPP markets over 5 years, the utilization rate of tax incentives for Canada remains very low at 18%, with many businesses still paying higher MFN tax rates.

III. DOMESTIC MARKET & SPECIFIC INDUSTRIES

• Steel Industry Struggles: Domestic steel prices have been adjusted downward 15 times in six months, yet local producers find it difficult to compete with a massive influx of cheap Chinese steel.

• Sugar Industry Growth: Several sugar enterprises recorded significant profit growth due to high sugar prices, though the industry now faces the challenge of expanding raw material areas.

• Green Consumption: MoIT is promoting a national action program for sustainable production and consumption, focusing on integrating green trends into modern distribution systems.

C. COMPETITION AND CONSUMER PROTECTION

• Credit Card Fraud: Authorities have dismantled a criminal group that defrauded over 7,000 people of 136 billion VND by posing as bank staff offering “free cash withdrawals”.

• E-commerce Safety: Shopee and the Vietnam E-commerce Association (VECOM) launched the “Shop Safely with Shopee” initiative to educate users on identifying risks and promoting authentic products via Shopee Mall.

• Trade Defense: Vietnamese tire manufacturers achieved a preliminary victory in a US anti-subsidy review, providing a vital lesson for businesses in navigating international trade defense cases.

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Analogy: The current economy is like a ship navigating through a narrow strait; while the engines are getting a boost from lower interest rates (monetary policy), the crew must stay vigilant against “pirates” (fraud and scams) and adapt to new “environmental regulations” (green standards) to reach the open sea of sustainable growth.