As the US economy surges on the back of a massive fiscal stimulus and pent-up demand, exporters in Asia are seen to be receiving huge benefits, with Vietnam gaining the most, according to a report from Bloomberg Economics.
BE forecasted that the US growth rate will accelerate to 7.7% this year, a significant jump from the 3.5% seen in late 2020. Such would add more than one percentage point to Vietnam’s expansion.
Chief Asia Economist Chang Shu said on Tuesday that the US growth upgrades are good news for Asia, one of the most export-oriented regions closely tied to the American economy. The US buys more than 10% of Asia’s exports on average.
In addition to the increase in direct demand, “there are also likely to be significant indirect spillovers” with Asian firms intertwined in a web of supply chains to America, said Shu.
The research showed that even that more modest upgrade would give a bump to growth in Asian economies ranging from 0.14 to 0.52 percentage points. Shu further highlighted that the key factor to determine the extent of positive spillovers will be the composition of US spending — “the greater the share that goes to the services, the less punch the US consumer splurge will pack for Asian exporters”.
While coronavirus cases and deaths are growing in the US, the country’s rapid vaccine rollout has allowed gradual reopening of businesses, healing of the labor market and fresh influx of cash.
The $20.5 trillion US economy was previously not expected to recover until at least the end of 2021. But it has shown resilience in the past months, combined with systematic actions against the pandemic and declining economy.
America's economic recovery is a sign of promise for Asia, especially for Vietnam.
Vietnam has been seeing a strong rise in exports in the first quarter of 2021, thanks to the US. The Southeast Asian country recorded an increase of 4.5% in its GDP for the first quarter compared to last year, driven by a surge in the sale of goods and services to the US. In March alone, Vietnam saw an almost 20% increase year-over-year.
Data reveal that the US imports from Vietnam were about 29% of the country’s total exports, that’s higher than the 20% average pre-COVID era. Smartphones and computers are the key export growth contributors, comprising about 30% of the total exported goods.
It is likely that the US share of Vietnam’s exports will remain high for some time, economists said, considering that Vietnam is one of the US’ largest trading partners. They warned, however, that some of the gains may be hard to repeat given the tricky health crisis. Issues on currency manipulation may also affect the two countries’ relationship, though the US is unlikely to focus on it right now.
Both the US and Vietnam’s new governments vowed to continue to strengthen their cooperation, 25 years since the establishment of their bilateral relations in 1995. As trusted partners and two of the most important allies, the US and Vietnam’s partnership, which spans political, economic, security and people-to-people ties, will continue to expand, especially as the two countries recently reiterated their commitment to their aligned interests in trade and security.