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Here is your Mekong Memo Vietnam for January 4, 2024.
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Trade Puts in a Solid Performance
Vietnam's trade in 2023 was marked by a significant decrease in exports to the EU and US, yet an overall trade surplus reaching a record $26-28 billion (different numbers from VietnamPlus and Xinhua). Despite a 9.6% drop in exports to the EU and US, amounting to approximately $166 billion, Vietnam's economy displayed remarkable resilience. Notably, foreign direct investment (FDI) firms powered this performance, contributing 73.1% of Vietnam's total export revenue, or $259.95 billion. The decline in seafood exports, down 18% to $8.98 billion, raised concern in some quarters. Nevertheless, Vietnam's total foreign trade hit a solid $683 billion and growth in sectors like agriculture and steel, alongside trade agreements that seem to be working effectively, position it well for further growth this year.
Electricity Prices Set to Remain Elevated
Nguyen Anh Tuan, General Director of Vietnam Electricity (EVN), announced at a recent conference that electricity prices in Vietnam are unlikely to decrease due to current demand and resource limitations. Tuan highlighted that electricity production relies on finite natural resources like hydropower, which, along with EVN's financial challenges, make price reductions improbable. Hydropower, typically 35% of Vietnam's total output, dropped to 28.4% due to droughts, while coal-fired power increased to 46.2%. Renewables made up 13%. The cost to produce electricity is rising as resources deplete, necessitating adjustments in retail electricity pricing policies in 2024 to address EVN's financial difficulties.
Real Estate Industry Looks to the Future
The year 2023 was a challenging one for Vietnam's real estate market, evidenced by a significant drop in resort real estate sales (the highest in a decade), and the shuttering of 1,286 businesses in the sector. The market was saddled with a mismatch in supply and demand, particularly in affordable housing, with an 8% increase in bankruptcies compared to the previous year. The resort real estate market saw an 80% drop in transactions and an increase in unsold properties, with inventories in Phu Quoc Island, Binh Thuan Province, and Ba Ria - Vung Tau Province reaching alarming levels. Despite these setbacks, new laws passed by the National Assembly, including the Real Estate Business Law and the Housing Law, effective from 2025, are expected to streamline project transfers and support sustainable market development. As the government takes measures to address market difficulties, the industry hopes for a rebound from the second quarter of 2024, with a gradual return to stability expected by 2026.
Advancements in Carbon Credits and Renewable Energy
Vietnam marked a milestone in environmental initiatives by selling 10.3 million forest carbon credits to the World Bank's International Bank for Reconstruction and Development, generating approximately 1,200 billion VND (~$49M). Across the board, Vietnam's energy sector is undergoing a significant transition, with a focus on renewable resources in an effort to achieve carbon neutrality by 2050. This includes the development of hydrogen energy and an increase in hydrogen production capacity, aiming for up to 20 million tonnes by 2050. Additionally, Vietnam is working towards boosting its electricity capacity from offshore wind and gas projects, contributing nearly half of its total electricity capacity by 2030.
Vietnam Top 25 Economy by 2038
Vietnam is projected to become one of the world's top 25 economies by 2038, as forecasted by the Centre for Economics and Business Research (CEBR). The nation is expected to advance from its current 34th position to 21st in the next 15 years. This climb is attributed to Vietnam's positioning within the global value chain, effective domestic reforms, and enhanced productivity. With a large, young population and targeted economic strategies, Vietnam is well-positioned to become a high-income country by 2045, surpassing most ASEAN countries in economic standing.
Read more: Nhan Dan Online
Targeted CPI Achieved in 2023
Vietnam's Consumer Price Index (CPI) in 2023 rose by 3.25%, in line with the National Assembly target. The increase was led by rising costs in medical services, tuition fees, electricity, and rice, with 10 out of 11 commodity groups experiencing price hikes. Housing and construction materials saw the highest increase at 6.58%. Petrol prices fell by 6.94%, while post and telecom services saw a 0.81% decrease. The year also saw a rise in domestic gold prices and a stable US dollar rate in the free market.
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