euro zone crisis to make deep cut into Vietnam’s GDP

10-Jun-2010 Intellasia | The Saigon Times Daily | 7:01 AM Print This Post

Financial woes in Europe could drag Vietnam’s gross domestic product (GDP) growth rate this year down by up to 1.7 percentage points as the country’s export to the European Union is being hit hard, said a foreign economist.

Luca Silipo, chief economist for Asia Pacific region of Natixis bank, told a seminar held on Friday in Hanoi that “there are still lingering consequences of the European financial crisis;’ which in the end would translate into weaker demands for Vietnamese goods. This turbulence, triggered by soaring budget deficits in some EU member countries like Greece and Spain, is all the bitter for Vietnamese exporters as the euro has been falling sharply against the US dollar, making Vietnamese goods less competitive there.

Silipo said that the jobless rate in the EU hovering around 3 percent in 2008 could have peaked up to 6 percent by the end of this year, causing serious slump in consumption and affecting imports in this continent.

In fact, the global recession in the 2007-2009 period has prompted trade between Vietnam and Europe to nosedive last year, falling by some 13.5 percent to $9.38 billion. In this year to date, while Vietnam’s exports to major markets have increased staggeringly, Europe- bound shipments have lagged far behind.

The general Statistical Office in its latest report said while Vietnam saw its exports in the first four months to the United States soaring 22.3 percent to $3.9 billion, and to the Asean countries increasing 21.8 percent to $3.4 billion, the country obtained only $3.1 billion from the EU, a year-on-year increase of 4.2 percent. Vietnam’s exports to Japan and China also increase strongly, by 23.6 percent and 38.4 percent to $2.2 billion and $1.8 billion, respectively.

According to Natixis’ data, Vietnam’s exports to the euro zone accounts for about 12 percent of the country’s total export turnover.

Meanwhile, around 35 percent of processing trade handled by Vietnam is from Asian countries like Malaysia and the Philippines, which mainly focus on exports to Europe. That means a large amount of processed products ordered by Asean countries will end up in Europe, according to Natixis.

Hence, export from Vietnam into Europe could plunge once demand for foreign goods in the region shrinks, affecting general economic development and could lead to a loss of about 1.7 percentage points of actual GDP growth rate this year, Silipo said.

Meanwhile, Vietnamese commodities bound for Europe have become more expensive due to the depreciation of the euro against the US dollar, while Vietnamese exporters often price their products in the greenback. Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), told the Daily earlier that due to the weaker euro, several buyers had asked for renegotiating import contracts. “We offer products with prices in dollars but now that the dollar has strengthened while the euro has weakened, our EU partners want lower prices.

Therefore, negotiations on contracts for seafood exported to the EU have been delayed;’ he said.

The euro has fallen some 20 percent this year due to the European debt crisis, diving to under $1.20 per euro last Friday, the lowest level since April 2006.


Category: Economy

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