Vietnam's GDP growth accelerated to 5.33% year-on-year in the third quarter of 2023
Vietnam’s GDP expanded 5.33% year-on-year (YOY) in Q3 of 2023, pointing to 3 consecutive quarters of recovery.
Vietnam’s GDP increased by 5.33% in the third quarter of 2023, indicating a positive trend with consecutive quarterly increases compared to 3.28% in the first quarter, and 4.05% in the second quarter (which was revised down from 4.14%). However, implying that the government’s target of 6.5% annual growth this year will most likely be missed. Nevertheless, the GDP increase in the first nine months of 2023 indicates that the economic recovery is continuing, although at a slower pace. Overall, Vietnam’s GDP increased by 4.24% in the first nine months of 2023.
Between January and September, the services sector grew by 6.32%, agriculture grew by 3.43%, and the construction industry grew by 2.41%.
The services sector boosted economic output during the primarily through retail and tourism. Vietnam has welcomed 8.9 million international visitors thus far in 2023, surpassing the year-end target of 8 million international visitors. The majority of the arrivals (6.85 million) came from Asia. The Republic of Korea remains the largest source of tourist arrivals, with over 2.5 million visitors, followed by China in second place. Revenue from accommodation and catering services increased by 16% YOY, while earnings from travel and tourism services increased by 47.7%. This success can be explained by travelers returning to popular destinations, thus opening an opportunity for Vietnam to welcome more Asian visitors thanks to y, diverse attractive destinations, and relatively low airfare prices. It is also worth noting that the efforts of the Vietnamese tourism industry to overcome challenges following the pandemic also have contributed to this popularity. At the same time, it demonstrates the government’s policies has successfully assisted the tourism industry in promoting recovery and increase competitiveness with other destinations in the region and around the world.
Nevertheless, this quarter’s GDP growth is the lowest third-quarter GDP growth in 13 years, only slightly higher than the same quarters in 2020 and 2021, according to data released at a General Statistics Office conference. At the end of the second quarter this year, expectations indicated that for Vietnam to achieve a full-year growth rate of 6-6.5%, the final two quarters of the year would need to achieve a growth rate of 8-9%. However, third-quarter data paints a considerably darker picture, indicating that double-digit growth is required in the fourth quarter. The situation would put significant pressure on government policy to improve major sectors such as services and exports. According to economic experts, it is now necessary to adjust the country’s visa policy in order to attract more international travelers, particularly from the European Union and the United States.
Vietnam’s trade surplus is $21.68 billion in the first nine months of 2023
During the nine months, total goods import-export turnover was $4497.66 billion, with export turnover of $259.67 billion, recording a trade surplus of $21.68 billion.
In the first nine months of 2023, Vietnam’s total import-export turnover of goods was $449.66 billion, and the country’s trade surplus reached $21.68 billion, up from $6.9 billion in the previous year’s corresponding period, with a $2.29 billion trade surplus recorded in September alone. The country recorded an export turnover of $259.67 billion, and an import turnover of $237.99 billion, an 8.2% and 13.8% decrease respectively.
The main reason for Vietnam’s export decline is the global economy’s slow recovery, as well as lower demand in developed countries like the United States, the European Union, and China. This is explained by the tightened monetary policies with efforts to return these countries’ inflation rates to target by raising interest rates, which resulted in lower demand for consumer and business products.
Despite low global exports, the fruits and vegetables industry maintained positive export growth in the first nine months of 2023. Fruit and vegetable exports are expected to total $4.2 billion in the first nine months of 2023, a 71.8% increase over the same period last year. China was the primary importing market, accounting for nearly 64% of Vietnam’s total fruit and vegetable export value. The main reason for this trend is that Vietnamese fruits and vegetables are becoming more popular among Chinese consumers as their quality improves. Furthermore, the fruit protocols signed with China last year bring many benefits to Vietnam’s fruit and vegetable export activities in terms of price and output stability.
In the first nine months of 2023, Vietnam is becoming more appealing to foreign investors
The country has seen a remarkable inflow of Foreign Direct Investment (FDI) in the first nine months of 2023, indicating growing confidence among international investors
As of September 20, the total newly registered, adjusted, and contributed capital, as well as foreign investor share purchases, totaled approximately $20.21 billion, representing a 7.7% YOY increase. There were 2,254 new FDI projects that received official investment registration certificates, a remarkable increase of 66% compared to the same period last year. This increase emphasizes the country’s attraction as a desirable destination for foreign investors.
The Red Delta River region accounted for 45% of the total capital invested in the country, outnumbering the Southeast region by 50%, indicating that the Northern provinces are currently the most appealing location for investors. Hanoi was the most desirable investing area with $2.53 billion in total registered investment capital, accounting for 12.5% of the total registered investment. Hai Phong and Ho Chi Minh City ranked as second and third place with a total registered investment capital of $2.21 billion and $1.96 billion respectively.
The processing and manufacturing industry emerged as the leader, securing over $14 billion, accounting for 69.3% of the total and representing a 15.5% YOY increase. Real estate followed accordingly, accounting for approximately 1.94 billion USD, or 9.6% of the total investment.
The first reason for Vietnam’s rise as a top destination for attracting foreign direct investment is its favorable demographics. The country is one of the world’s 16 most populous, with 40% of the population under the age of 25. As a result, Vietnam is experiencing a “Golden population” period with an abundant young labor force. It is worth mentioning that labor costs in Vietnam are relatively low when compared to other countries in the region and around the world. This is a significant advantage in attracting foreign investors who compare investment opportunities in Vietnam to other countries in the region and Asia.
Secondly, Vietnam is in a strategic location that offers many investment opportunities. The country is located in the heart of Southeast Asia, bordering Laos, Cambodia, and China, making it accessible by road, sea, and air freight. It has 3,444 kilometers of coastline that is suitable for maritime transportation and seaport construction. In addition, infrastructure investment in Vietnam has increased, including highways, railways, seaports, and air routes to facilitate cargo transportation. To encourage investment, the Vietnamese government also encourages and supports the establishment of industrial parks, industrial clusters, and export processing zones.
Thirdly, the diverse economic structure of Vietnam is another indicator of its attractiveness. During the first nine months of 2023, the service sector accounts for 42.72% of Vietnam’s GDP, followed by industry and construction (37.16%), agriculture, forestry, and fishery (11.51%), and product taxes less all subsidies (8.61%). The country’s robust economic growth explains its attraction to foreign investors. One valuable highlight is that thanks to the electric vehicle (EV) manufacturer VinFast, Vietnam became the world’s third-largest automaker by market capitalization in 2023. This not only indicate a promising future for the EV industry in Southeast Asia overall but also exemplifies Vietnam’s emerging manufacturing capability.
The wood export industry has shown signs of recovery in the third quarter of 2023
Vietnamese wood and wood product exports fell substantially in the first half of 2023. However, there has been some improvement in the second half.
Overall, Vietnam’s export value of wood and wood products was estimated to be 9.7 billion USD in the first three quarters of 2023, a 21.3% decrease from the same period in 2022. The export value of wood products was estimated to be 6.5 billion USD, a decrease of 24.3% from the same period in 2022. A positive signal is observed when compared to the first half-year performance. Wood and wood product exports totaled 6.1 billion USD in the first six months of 2023, a 28.3% YOY decrease. Accordingly, wood product exports totaled 4.1 billion USD, a 32.4% decrease from 2022’s same period.
The Import-Export Department estimated that in September of 2023, the export value of wood and wood products reached 1.2 billion USD, down by 7% compared to the previous month, but up by 6.7% compared to September of 2022. Of which, the export value of wood products was estimated at 785 million USD, down by 6.6% compared to August 2023, but up by 5.1% compared to September 2022.
Despite being down nearly 30% from the same period in 2022, wooden furniture was the most important export item in the first nine months of 2023, accounting for nearly 60% of total export value. Most products in the structure of wooden furniture have seen a significant decrease in exports. Aside from wooden furniture, a variety of other exported products such as wood chips, wood boards and flooring, wood pellets, wooden doors, and so on have decreased in price. Nevertheless, this decline was believed to be primarily the result of the global economic downturn, rather than a loss of competitiveness from Vietnamese wood products.
The Import-Export Department expected the outlook for exporting wood and wood products is forecast to be more positive in the last months of the year, thanks to the usual increase in housing market demand. Furniture inventories in the US, one of the five biggest wood and wood products importers, have dropped to 10% as of August and are expected to fall to 0% by the end of this year. According to statistics, since February 2023, US ready-built home sales have not suffered sharp declines. This is an opportunity for Việt Nam to boost the export in the near future.
Furthermore, furniture exported from Vietnam to the United States currently enjoys tariff benefits. Free trade agreements also make it possible for Vietnam to export furniture to additional potential markets such as Europe, Asia, and the Middle East. Vietnam is one of the few Asian countries with an FTA with the EU, which is considered a significant advantage over other competitors in the region given the attractive tariffs and other benefits from free trade agreements.
Given the positive outlook, wood manufacturers and businesses have been able to relieve some of the pressure, however, it is also critical for businesses to strengthen their internal resources in order to be ready for order resumptions in the recovering market and to embrace green transformation to improve competitiveness.
About this report
This report was compiled with contributions from the team of business experts in our Vietnam office.
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