Growth in industrial production in the first quarter of 2024 came in at 6.18 per cent year-on-year, contributing 2.02 percentage points to overall GDP growth, which was estimated at 5.66 per cent year-on-year, or higher than the figure in the opening quarter during the 2020-2023 period, according to the Ministry of Industry and Trade (MoIT).

Growth engine

The manufacturing and processing sector remains a growth engine of Vietnam’s economy, expanding by 6.98 per cent in the first quarter and contributing 1.73 percentage points to overall GDP growth. Electricity production and distribution increased 11.97 per cent, contributing 0.45 percentage points, while water supply and waste and wastewater management and treatment rose 4.99 per cent, contributing 0.03 percentage points. The mining sector, meanwhile, declined 5.84 per cent, shaving 0.2 percentage points off GDP growth.

Industrial production in March saw a recovery in the Index of Industrial Production (IIP), with estimated growth of 20 per cent compared to February and 4.1 per cent compared to March 2023.

The IIP in the first quarter rose by 5.7 per cent year-on-year. The manufacturing and processing sector’s index increased 5.9 per cent year-on-year, contributing 5.2 percentage points, while electricity production and distribution rose 12.1 per cent, contributing 1.1 percentage points, and water supply and waste and wastewater management and treatment rose 4 per cent, contributing 0.1 percentage points. The mining industry lost 4.1 per cent, shaving 0.7 percentage points off overall GDP.

The MoIT also reported that, in the first quarter, key sectors to record IIP growth included chemicals and chemical products, by 28.4 per cent; rubber and plastic products 25.8 per cent; electrical equipment 24.8 per cent; coke and refined petroleum 21.7 per cent; furniture 18.1 per cent; textiles 14.6 per cent; and food production and processing 4.5 per cent.

In particular, 54 of Vietnam’s 63 localities registered IIP growth, including Tra Vinh, by 102 per cent; Khanh Hoa 37 per cent; Bac Giang 23.9 per cent; Thanh Hoa 20 per cent; Ha Nam 17.2 per cent; and Quang Ninh 14 per cent.

Another positive sign in the recovery of production and consumption was an increase in the consumption index of the manufacturing and processing sector, with growth of 8.2 per cent year-on-year in the first quarter. The average inventory ratio in the quarter was 68.7 per cent compared to 81.1 per cent last year.

Regarding employment at industrial enterprises, as of March 1, 2024, the number of employees had increased 1.3 per cent month-on-month and 1.1 per cent year-on-year. Of this, the number of workers at State-owned enterprises rose 0.1 per cent month-on-month and fell 0.5 per cent year-on-year; at non-State enterprises rose 1.1 per cent and fell 0.6 per cent; and at foreign-invested enterprises rose 1.5 per cent and 1.7 per cent.

By industry, the number of employees working in mining increased 0.2 per cent over the previous month and 0.7 per cent over the same period last year; in manufacturing and processing industries increased 1.4 per cent and 1.1 per cent; in electricity, gas, steam, and air conditioning supply remained unchanged compared to the previous month and increased 0.8 per cent year-on-year; and in water supply, waste and wastewater management and remediation activities increased 0.1 per cent and 1.2 per cent.

Improvements in production and trade

The manufacturing and processing sector retained its leading position in FDI attraction in the first quarter of the year. As of March 20, 2024, total newly-registered investment capital in the sector stood at $3.04 billion, accounting for 63.7 per cent of the country’s total.

Business has also improved. A survey of 6,500 enterprises conducted by the General Statistics Office (GSO) on business trends in each quarter revealed that 22.1 per cent of enterprises agree that production and trade were better in the first quarter of 2024 that in the fourth quarter of 2023; 42.8 per cent believe production and trade were stable; and 35.1 per cent said they faced difficulties in production and trade.

The number of enterprises that were optimistic about business prospects in the second quarter of 2024 was estimated at 45.4 per cent, while 36.6 per cent expect production and trade to be stable and 18 per cent believe they will face difficulties. Foreign-invested enterprises (FIEs) and non-State enterprises are the most optimistic about production and trade in the second quarter, with 82.2 per cent of the total believing they will be better and be stable compared to the first quarter. Meanwhile, the rate at State-owned enterprises (SoEs) is 78.1 per cent.

Regarding production volumes, 22.3 per cent of enterprises said production in the first quarter of 2024 increased compared to the fourth quarter of 2023, 38.9 per cent thought production was stable, and 38.8 per cent thought production declined. Looking to the second quarter, 44.1 per cent believe production volumes will increase, 38.2 per cent said they will be stable, and 17.7 per cent predict a decline.

The survey also revealed that 20.9 per cent of enterprises had more orders in the first quarter of 2024 than in the fourth quarter of 2023; 42.6 per cent had stable orders; and 36.5 per cent had fewer orders. For the second quarter, 42.2 per cent believe they will have more orders while 40.7 per cent forecast a stable number and 36.5 per cent anticipate a decline.

Regarding export orders, 19.1 per cent of respondents said they had higher new export orders in the first quarter than in the fourth quarter of 2023; 47.3 per cent had stable new export orders; and 33.6 per cent witnessed a decline in new orders. In the second quarter, 36.9 per cent expect an increase in new orders while 46 per cent believe they will have a stable number and 17.1 per cent predict fewer orders.

Vietnam’s PMI fell below 50 in March, though the February figure was 50.4, above the 50.0 no-change mark for the second consecutive month, according to S&P Global. This growth led to a recovery in employment and an increase in business confidence.

However, according to some analysts, domestic industries still face a host of challenges. The global economy is forecast to recover but only at a slow pace. Economic growth in China has slowed, affecting both supply and demand in global and regional production, including in Vietnam. As a pillar of its economy, industrial production in Vietnam needs new growth engines for breakthrough recovery in the future.