According to the Ministry of Industry and Trade, as the EU has closed borders, consumption demand of Vietnam's main export products like textiles, footwear, furniture and phones will likely decline.

Textile, leather, shoes and wood face difficulties

Facing the outbreak of acute respiratory infections caused by a new strain of coronavirus (Covid-19) becoming more and more serious, the EU has become the world's epidemic.

On March 17, for the first time, leaders of all EU member countries agreed with the proposal of the European Commission to adopt a joint plan of closing the border of EU territory. This closure of external borders is not a lockdown.

According to the Ministry of Industry and Trade, considering a number of economic aspects, the epidemic control measures will affect the speed of goods movement from export, transportation, customs clearance, storage and loading to consumption; causing disruption or delaying the flow of economic - trade - service.

Besides that, supply-demand of the market; demand for goods exchange; and trade activities between the EU and partners, including Vietnam, will also be limited.

Demand for consuming non-essential goods such as textiles, footwear, furniture, and phones, (Vietnam's main export products in the EU market) will likely decline. However, forecasts for purchasing power for agricultural and food products can still be maintained.

The Ministry of Industry and Trade further informed that amid the Covid-19 epidemic, goods imported into EU countries by air could be significantly affected due to flight cancellations, delays or reductions. Besides that, intra-regional transportation is also affected as some countries are tightening border control regulations.

The Ministry of Industry and Trade analyzed that the regulations related to epidemic control may also delay the signing of export orders in the future between Vietnam and EU partners; obstructing bilateral trade - investment promotion activities; and preventing the movement of experts and workers in restricted areas in the context of tightening isolation to combat epidemics.

Will exports drop by 6-8%?

The EU is an important trading partner and the second-largest export market of Vietnam. The volume of Vietnam's exports and imports to the EU is relatively large.

In 2019, the volume of goods exported by sea reached 20.5 billion EUR, by air hi 14.5 billion EUR, railways 671 million EUR; while imports via sea, air and rail were respectively 5,990 billion EUR, 3.56 billion EUR and 9 million EUR.

The first three months of the year saw a reduction in imports and export between Vietnam and the EU due to lots of holidays for both sides. Besides that, enterprises in some areas will wait for the Vietnam-EU FTA (EVFTA) to take effect to enjoy preferential tariffs along with the current forecast of economic growth of the EU. It is forecasted the prospect of import and export growth between Vietnam and the EU is relatively low.

"The exports of Vietnam in the first and second quarter exports were forecasted to reduce by 6-8% if the epidemic continues occurring until June.  Some key commodities such as computers, phones, and components were forecasted to continue to decline sharply due to difficulties in both supply stages and reduction in market demand," the Ministry of Industry and Trade forecasted.

In the second half of 2020, according to the Ministry of Industry and Trade, export growth may be better because the epidemic is repelled and the EVFTA comes into effect.

Therefore, enterprises need to closely monitor the epidemic to have an appropriate production and business plan and have a plan to transform trade promotion in the direction of taking advantage of online advertising, connecting online businesses to maintain and develop the market even when the disease is happening, as well as ensuring that it can be quickly recovered business activity right after the epidemic is diminished and ends.

According to the border closure plan of EU territory, non-EU citizens will not be allowed to enter the region for at least the next 30 days and it could be extended if necessary. EU citizens, their relatives, diplomats, staff/medical professionals, and freight carriers are exempt from the above provision. Internal movements are permitted but subject to certain restrictions.

The purpose of this regulation is to protect the health of EU citizens, ensure the appropriate treatment of individuals wishing to transport and ensure basic goods and services are accessible.

This EU regulation may not affect the import and export of goods between Vietnam and the EU in the short term because it only applies to individual travel routes; so basic cargo transportation and trading activities are not restricted.

Source: Custom News