The EU-Việt Nam Free Trade Agreement, which took effect on August 1, scraps duties on 71 per cent of Việt Nam’s goods right away, rising to 99 per cent in seven years. Photo baochinhphu.vn

HCM CITY — Việt Nam is expected to continue growing its share of global exports despite decline amid the resurgence in the COVID-19 pandemic after three months of no local transmissions, according to an HSBC report.

“If there was a new wave of infections in Việt Nam, it could still be relatively better off given that the situation is worse in many other markets and regions,” according to HSBC Global Research. 

Việt Nam is not alone as Hong Kong, which had also largely contained the outbreak, has also seen a surge in cases recently, showing the risks are far from over and investors need to position themselves accordingly.

“Vietnamese authorities have done a good job in containing the transmission by far, which increases our confidence that the country is better prepared to deal with any further waves. 

“Việt Nam is one of the best long-term growth stories in Asia.

“If Việt Nam were a company, we would highlight market share gains, a strong balance sheet, robust growth, and good management. We maintain our positive view on Việt Nam.” 

The pandemic and US-China trade tensions have urged companies to diversify their supply chains. Japan recently announced a first list of companies it will subsidise to relocate from China to Southeast Asia. 

Some 30 companies plan to move to Southeast Asia, half of which could move to Việt Nam to produce medical equipment, semiconductors, phone components, air conditioners, and power modules.

The report, titled Asia Frontier Insights: Reassessing the markets: Việt Nam encore, expected Việt Nam’s GDP to grow by 3 per cent this year, the only ASEAN country to have positive growth this year. 

Despite the outbreak, most economic indicators are showing signs of normalisation. The economy is getting back on track. Việt Nam’s second quarter GDP growth was 0.4 per cent year-on-year despite lockdowns and other impacts of the pandemic.

Retail sales rebounded by 6.2 per cent year-on-year in June while industrial production grew by 7 per cent. 

But experts warn that the pandemic is too unpredictable and could impact Việt Nam more negatively than anticipated.

The Asian Development Bank has forecast Việt Nam to grow at 4.1 per cent this year.

In its latest update on June 18 it said developing economies in Asia would grow very little this year since preventive measures against COVID-19 have affected their economic activity while import demand has weakened.

The International Monetary Fund forecast the global economy to grow at minus 4.9 per cent this year, the US at minus 8 per cent and the EU at minus 10.2 per cent, and China by only 1 per cent. 

The World Bank expects the global economy to shrink by 5.2 per cent, developed countries by 7 per cent as domestic demand and supply, trade and finance have been severely disrupted and emerging and developing markets by 2.5 per cent.

Trade pact

The EU-Việt Nam Free Trade Agreement (EVFTA), which took effect on August 1, will reduce duties to zero per cent on 71 per cent of goods, rising to 99 per cent in seven years. This should also be positive for Việt Nam’s exporters in sectors like electronics and textiles, according to the HSBC report. 

Speaking at a recent meeting on trade co-operation with EU partners, Deputy Minister of Industry and Trade Hoàng Quốc Vượng said bilateral trade has increased from about $4.1 billion in 2000 to $56.45 billion last year. Vietnamese exports to the EU were worth almost $41.5 billion. 

With a population of more than 500 million and a combined GDP of over $15 trillion, or 22 per cent of the world’s GDP, the EU is the largest exporter and importer in the world with annual trade of $3.8 trillion. 

Under the EVFTA, the EU will immediately remove import duties on 85.6 per cent of tariff lines – equivalent to 70.3 per cent of Việt Nam’s exports.

After seven years 99.2 per cent of tariff lines, equivalent to 99.7 per cent of Việt Nam’s exports, will be eliminated. 

Việt Nam will cut 48.5 per cent of tariff lines, equivalent to 64.5 per cent of EU exports, to zero immediately and 91.8 per cent of tariff lines in seven years. — VNS