Production shows signs of slowing down

In 2024, the country’s index of industrial production (IIP) will increase by 8.4% compared to 2023 (1.3%), the highest level since 2020, according to the General Statistics Office. Some key manufacturing industries are developing at high speed such as textiles, rubber, plastics, wood and wood products, and electronics.

Particularly in the fourth quarter, this agency said that production continued its positive growth trend. Businesses stepped up production and prepared goods to meet year-end consumer demand, helping IIP increase by 7.9%.

According to a survey by the General Statistics Office, 38% of businesses rated their production and business activities in the last three months of the year as better and over 20% encountered difficulties. However, these two indexes are both better than the previous quarter.

The recovery path shows signs of slowing down. The purchasing managers’ index (PMI) of Vietnam’s manufacturing industry in December 2024 announced by S&P Global fell below the 50 threshold for the first time in three months, to 49.8 points. Results below 50 reflect a trend of narrowing operations.

The US market data and analysis firm said that last month’s PMI results showed that overall business conditions had decreased slightly at the end of the year. According to the survey, output and the number of new orders both increased in December, but the pace was the weakest in the past 3 months.

“Vietnam’s manufacturing industry has lost its growth momentum in the last month of 2024,” the report commented.

Some businesses reported improving customer demand, while others reported declining market conditions. Total new orders increased, but export orders decreased for the second consecutive month.

In a recent discussion, Dr. Nguyen Xuan Thanh, public policy lecturer, Fulbright University Vietnam, noted signs that export trends to the US and China are slowing down in the last months of the year.

Business confidence in the last month of 2024, according to a survey by S&P Global, also fell to its lowest level since May 2023. Andrew Harker, Economic Director at S&P Global Market Intelligence, explained that uncertainties in the world market have contributed to reducing business confidence of Vietnamese manufacturers.

“This partly reflects the uncertainty regarding the upcoming US administration’s plans on taxes,” he stated.

Assessing the challenges of recent months, the fourth quarter survey results of the General Statistics Office also showed that more than 30% of processing and manufacturing enterprises encountered difficulties due to low international demand. The domestic market is not favorable, with 53% saying demand is low and more than 51% saying competition is high.

In a forum held last month in Ho Chi Minh City, Dr. Can Van Luc, chief economist of BIDV Bank, said that difficulties for businesses are still legal issues, input costs, and orders not recovering. uniformity, as well as labor shortage and low productivity in the context of increasing green and digitalization requirements.

However, manufacturers are still optimistic about the possibility of expanding operations in 2025. According to a survey by S&P Global, businesses expect output to increase in the coming months. As a result, they have increased purchases again at the fastest rate in the past 4 months. The reasons pointed out are increased expectations of new orders, improvement of economic conditions and resolution of some conflicts in the world.

About 74.5% of processing and manufacturing enterprises in Ho Chi Minh City forecast that the first quarter of this year will be better than the last quarter of 2024, according to a survey by the Department of Statistics. While only 25.5% think it will be more difficult.

However, there are still unpredictable “headwinds”. According to the Ho Chi Minh City Business Association (Huba), adverse developments in world politics will continue to have a strong impact on production, business and import-export this year.

Dr. Nguyen Xuan Thanh at Fulbright Vietnam also warned that the possibility that export growth in 2025 will be lower than last year and “should not put much hope in this field”.

These challenges add to the current internal situation of some businesses whose resilience has eroded, and the purchasing power of a part of the population has not been good since last year, according to Huba. With external conditions, Dr. Can Van Luc said that Donald Trump’s return to the White House helps Vietnam partly benefit, but the disadvantages may be more.

Giving recommendations, more than 22% of businesses asked by the General Statistics Office want managers to continue to take measures to stimulate domestic demand and propagate so that Vietnamese people prioritize using Vietnamese goods.

Over 20% of businesses expect to increase trade promotion activities and seek new markets. They also believe that it is necessary to continue to improve administrative procedures (25.2%), stabilize raw material prices (33.3%), and 42% want lending interest rates to continue to decrease.