Contrary to estimates from the beginning of the year, companies and experts claim that the global economic slowdown was quicker than anticipated and that overall demand from abroad drastically decreased, resulting in a loss in orders that had an impact on the world economy and industrial output. As a result, there is virtually little chance that output will increase during this second quarter.

In the first quarter of 2023, the added value of the industry decreased by 0.82% over the same period last year, which is the deepest decrease of the same period of years in the period 2011 – 2023, reducing 0.28 percentage points in the increase in total added value of the whole economy (According to a report from the Ministry of Industry and Trade).

Photo: Manufacturing industry

One of the reasons is Demand overall decreases

A representative of the Department of Industry – Ministry of Industry and Trade said that the main reason was because the processing and manufacturing industry decreased by 0.37%, reducing 0.1 percentage point. The added value of the processing and manufacturing industry decreased by 0.37%, so this industry no longer plays a key role in driving economic growth.

Entering February 2023, the number of orders and the size of orders decreased due to the decline in aggregate demand from abroad affecting industrial production.

Accordingly, many key industrial products were also recorded to decrease in the first quarter of 2023:

• Cars: down 17.8%
• Bar and angle steel: down 15.8%
• Motorcycles: down 13.8%
• Mobile phone components: down 13.4%
• Fabrics made from natural fibers: down 13.1%
• Mobile phones: down 13.1%
• Casual clothes: 10.2% off
• Cement: down 9.9%
• Urea fertilizer: down 6.3%
• Gaseous natural gas: down 6.1%.

Explaining the decline of industrial products, the Ministry of Industry and Trade said that:

1. Although domestic purchasing power has recovered, it is still weak, has not yet stimulated production, investment and consumption, and purchasing activities have decreased again.
2. Inflationary pressures and high interest rates have affected consumption of high-value products such as automobiles, including conventional products such as textiles, footwear, etc.
3. Enterprises still have difficulty in accessing capital, bank interest rates and input costs are high. Especially enterprises in the field of processing and manufacturing industry, because of the lack of orders, the ability to absorb capital has begun to decrease.

The situation in the world, the high price of input fuel and global energy has affected the production costs of domestic enterprises. Inflation is still high, monetary policy has not been loosened; The slow recovery of the world economy and the collapse of some banks in the world have had certain impacts

Second quarter signals of improvement

At the end of 2022 to the beginning of 2023, many forecasts suggest that the second quarter of 2023 industrial production may enter a recovery phase. However, at this time, many experts and businesses say that the possibility of an early recovery is very low.

In general, the overview of industrial production is not very positive, but a representative of the Ministry of Industry and Trade said that there are still positive signals for domestic production to recover. Some major economic sectors can be mentioned such as: China, the US, with higher growth than forecast; Some emerging economies in Asia such as India and Asean have grown steadily. Policies to stimulate demand for public investment and support enterprises of the State are effective in restoring production activities.

In addition, the number of new export orders increased for the first time in 3 months, although the industrial production index decreased, the trend increased gradually over the months; The import of raw materials and accessories shows signs of increasing… are signs that the situation of production, import and export in the coming time may have better changes.

The Ministry of Industry and Trade also said that in order to promote domestic industrial development, the domestic market will be strongly developed, taking this as a pillar when the external market faces difficulties; in which, focusing on programs to connect the consumption of processed industrial products and agricultural products; keep abreast of the production situation of sectors and fields, organize working with a number of key industries and localities in order to promptly grasp and remove difficulties to promote production development; continue to organize the connection of domestic enterprises to participate in the supply chains of FDI enterprises and large global enterprises.

Sources: CafeF News