US stimulus package will be a boon for Vietnam’s exports

The US latest stimulus package and Covid-19 vaccine rollout worldwide will likely provide support to Vietnam’s export expansion this year, which has been consistent with continued economic recovery as a result of improving external demand in the first two months of 2021, according to Viet Dragon Securities Company (VDSC).

On March 11, US President Joe Biden signed the US$1.9 trillion stimulus package, which includes measures ranging from stimulus checks to child tax credits, jobless benefits, vaccine-distribution funds, healthcare subsidies and restaurant aid. A major point in the plan contains a direct payment to most Americans, amounting to US$410 billion.

“With money flooding into the world’s biggest economy, we think the US stimulus package will give a further boost to Vietnam’s exports in the upcoming time,” noted the securities firm in a report. 

“As the low base effect dissipates in the subsequent months, we expect export growth to be around 13-15% in 2021, which would be the largest expansion since 2017,” it added.

According to the OECD, the US economy is expected to grow 6.5% in 2021 and 4.0% in 2022.

Buoyant trade growth in two-month period

In February, Vietnam’s exports fell slightly by 3.8% year-on-year, while imports rose by 9.8%, resulting in a trade deficit of US$460 million.

A fall in exports, however, is expected to be short-lived given its association with the one-week long break in Tet holiday, stated the VDSC.

In general, Vietnam’s trade growth remained robust in the first two months of 2021. Of which, exports increased by 23.7% year-on-year and imports recorded a faster growth of 25.5%.

The trade surplus in the January – February period came in at US$1.6 billion, slightly below a surplus of US$1.9 billion in the same period last year.

During the period, exports of tech products surged by 32.5% year-on-year and took up 36.3% of total exports. Apart from tech products, mechanical and furniture products’ exports continued to gain momentum after growing impressively in 2020.

Meanwhile, mechanical and furniture products’ exports jumped 77.2% and 40.3% year-on-year, respectively.

“Strong exports of these categories indicated an expansion of Vietnam’s manufacturing activity to serve the recovery of external demand,” it added.

On the other hand, demand for clothing and footwear remained sluggish as the world is still in partial lockdown. Textile and leather products only registered a slight increase in exports (+0.9% year-on-year in the first two months of 2021).

By key markets, the largest export and import growth in Jan-Feb were both with China. Exports to China were up 46.1% year-on-year and imports rose 65.9%, giving place to a trade deficit with that country of US$7.4 billion in the two months.

This was nearly double the trade deficit with China of US$3.8 billion in the same period last year.

Vietnam also reported significant improvements in trade with Western countries in Jan-Feb, with notable mention of the US (up 34.8%), UK (23.6%) and the EU (17.6%).

On the other hand, Vietnam’s export growth with other Asian countries remained relatively weak. Its exports to ASEAN and Korea increased by 3.9% and 7.1% year-on-year, respectively. In contrast, exports to Japan decreased by 4.9% year-on-year in the first two months.