The Vietnam Textile and Apparel Association (VITAS) said that textile mills performed well in the first seven months of this year.
Textile exports in the first half of the year were US$26.55 billion, an annual increase of 16.5%. The textile trade surplus was US$11.07 billion, an annual increase of 31%. The industry creates 1.9 million job opportunities with an average salary of VND 8.5 million per month.
But VITAS is worried that the situation will worsen in the next five months due to three adverse factors.
The first factor is the weakening import demand from Vietnam’s trading partners. China, Japan and many other countries are tightening COVID-19 prevention measures, disrupting trade.
This situation has been exacerbated by large trading partners such as the United States and the European Union, which have eroded consumer purchasing power and dragged down demand for textiles due to high inflation.
The conflict between Russia and Ukraine may become more intense in the short term. As conflicts continue unabated, exports and sales of textiles from the above-mentioned countries will remain sluggish in the coming months.
At the same time, the recent depreciation of neighboring currencies against the US dollar has put Vietnamese exporters at a disadvantage.
The RMB depreciated 5.3% against the US dollar, the Japanese yen depreciated 16%, and the Vietnamese dong only depreciated 1.8%, thus weakening the price advantage of Vietnam’s textile products.
In particular, the U.S. “Uyghur Forced Labor Prevention Act” (UFLP) and the European Union’s carbon fee plan are expected to set high standards for cotton. Therefore, Vietnamese companies must overcome more administrative obstacles before they can export their cotton products to these markets.
The second factor is the labor shortage caused by the shrinking urban labor force. The shortage of workers is an urgent problem because the textile industry is a labor-intensive industry. As many workers left the city during the epidemic and did not return, and many people retired early, the textile industry is expected to remain sluggish for the remainder of 2022.
The last factor is that the financial situation of many textile companies has deteriorated due to rising costs. The input cost of raw materials has increased by about 25%, and transportation costs have nearly tripled since the beginning of the year. Rising costs are expected to put textile companies in further financial distress, eroding profits and hampering expansion.
