The high cost of inputs and the reduced demand in many major markets make Vietnam’s exports face difficulties in the second half of 2022, especially the shortage of orders.
Mr. Than Duc Viet, General Director of May 10 Corporation, said that in Q4/2021, this business forecasts that the global textile market in 2022 will recover, even better than the time before the Covid-19 outbreak.
However, so far this assumption has had to be changed. The market in Q3 and Q4/2022 is declining with high input prices and reduced profits. In general, the business performance in the first half of the year is good but the second one is facing difficulties.
According to Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Clothing Association, in the first 6 months of 2022, the textile export turnover is estimated at $22.3 billion, up 17.7% compared to the same period in 2021. However, the market in the last 6 months of the year will face many challenges. The increased inflation in many countries with decreased global purchasing power, and a large number of inventories have made the number of orders decline sharply. At the same time, the price of raw cotton increased by nearly 20%, so Vietnamese textiles and clothing are under great competitive pressure.
Textile and garment enterprises are in short of orders until the end of the year. (Photo: Internet)
Mr. Nguyen Huu Phuoc, Director of Nguyen Nguyen Phuoc Footwear Trading Co., Ltd., said that, in the past, enterprises could receive orders from 1 to 2 quarters in advance. With the current market situation, now enterprises only receive orders 2-3 months in advance.
According to Mr. Phuoc, the market situation in the first 6 months of the year is quite positive, but the second half of the year is slowing down. September and October will be the “dip” of the order. In addition, inflation in major markets such as Europe and the United States increased, and the Russian-Ukrainian conflict continued to cause consumers to tend to tighten spending. This reduced the demand for procurement, pushing up the difficulty of the export situation in the second half of the year.
Currently, many footwear enterprises are in short of export orders. The order was not as plentiful as before, even canceled because of falling consumer demand, Mr. Nguyen Huu Phuoc shared.
Mr. Nguyen Quang Vu, Chairman of Binh Duong Leather Association, said that in the last months of the year, orders were decreasing. In August, September, and October, orders decreased by 30% compared to the same period of the previous year.
Meanwhile, according to Ms. Phan Thi Thanh Xuan, Vice Chairman of the Vietnam Footwear and Bag Association, enterprises also face many difficulties, the inventory rate is up to 40%. New orders from August 2022 to Q1/2023 are in short. Many businesses due to lack of orders may have to stop production.
Vietnam’s cement exports also decreased strongly, according to the Vietnam Cement Association, as China, a major import market, implemented the zero Covid policy. Since May, most of Vietnam’s main export markets have decreased sharply, typically Bangladesh, Taiwan, Malaysia, etc. In particular, both of the main markets, China and the Philippines fell sharply compared to the previous year. It is forecast that domestic cement consumption and exports continue to struggle in the second half of 2022.
Meanwhile, the Binh Duong Furniture Association (BIFA) reflects that high transportation costs have reduced the profitability of enterprises. There are wood products exported to the US. Market, the value of the product in the container is much lower than the shipping price. Not to mention, import demand from the US and European markets began to decline.
According to enterprises, the price of petroleum has decreased sharply, reducing the pressure on transport costs. However, the cost of inputs increased from 20-30% in many industries, and demand in many major markets decreased, causing Vietnam’s exports to face difficulties in the second half of 2022.
Facing this situation, the enterprises have changed to search for new raw materials, promote order finding, cut unnecessary costs, and increase labor productivity to compensate but still difficult to avoid difficulties.
Economists said that the US is Vietnam’s largest export market in the first half of 2022 with a total turnover of $56 billion. The US recession will surely impact Vietnam’s exports. Along with that, global economic growth in 2022 at only 3.6-3.6%, lower than the initial expectations and more instability, will affect Vietnam’s economy in the second half of the year.
Commodity associations propose that banks should extend debt, reduce interest rates, extend loans due, etc, and speed up the 2% interest rate support program from the budget package of VND 40,000 billion so that enterprises can have the capital for production. It is necessary to design a separate credit package to support exporters.
The Government considers continuing to reduce taxes and fees to reduce the burden on enterprises, support the search for suppliers to avoid supply breaks, and at the same time facilitate domestic sales. State budget revenues reached quite high in the first 6 months of the year (equal to 66% of the estimation). The Government needs to push the economic recovery packages in the last 6 months of the year, to create a spreading effect and stimulate the economy in the second half.