Vietnam's manufacturing growth is broken after Typhoon Yagi

Research firm S&P Global has just released the Vietnam Manufacturing Purchasing Managers' Index (PMI) report, which contains much negative news about Vietnam's manufacturing industry after the heavy damage caused by Typhoon Yagi.

Accordingly, Vietnam's PMI in September decreased from 52.4 (August) to 47.3 points. This result signals that business conditions are deteriorating again at the end of the third quarter of next year, after a period of strong growth.

The index decreased by more than 5 points, showing that the health of the manufacturing industry has weakened to the most significant level since November 2023. The reason is that Typhoon Yagi caused a sharp decline in manufacturing output in September, thereby ending a 5-month growth period. After a sharp increase in production in August, the decline in this survey period is the most significant since January 2023.

"Typhoon Yagi has had a severe impact on Vietnam's manufacturing sector as heavy rains and floods forced businesses to close temporarily, disrupting supply chains and production lines," said S&P Global experts.

In the face of the sudden developments, output, new orders, purchases, and inventories all declined. New export orders fell slightly, causing businesses to shop less for the first time in half a year.

Natural disasters have caused manufacturers to experience significant delays in delivery times from suppliers as floods disrupted transportation. As a result, inventories of purchased goods have fallen rapidly. According to statistics, this is the second-largest decline in the index's history, only worse than April 2020, a month affected by the pandemic.

However, S&P Global believes that the impact of Typhoon Yagi is only temporary. The PMI survey shows that manufacturers in Vietnam remain optimistic, believing that output will increase again by 2025. Notably, optimism reached its highest level in the past 3 months, as businesses believe demand will recover soon.

According to S&P Global, the demand situation will still be favorable for growth. It means we could see a rapid rebound in manufacturing as the post-hurricane recovery begins. As a result, companies remain optimistic about the outlook for next year and have increased employment even as workloads have declined.

The State Bank of Vietnam (SBV) is drafting a Circular regulating the restructuring of debt repayment terms by credit institutions and foreign bank branches to support customers facing difficulties due to the impact and damage of typhoon Yagi.

Accordingly, this policy will apply to customers borrowing capital in 26 provinces and cities directly affected by superstorm Yagi, including Ha Giang, Cao Bang, Lang Son, Bac Giang, Phu Tho, Thai Nguyen, Bac Kan, Tuyen Quang, Lao Cai, Yen Bai, Lai Chau, Son La, Dien Bien, Hoa Binh, Hanoi, Hai Phong, Hai Duong, Hung Yen, Vinh Phuc, Bac Ninh, Thai Binh, Nam Dinh, Ha Nam, Ninh Binh, Quang Ninh, Thanh Hoa.

Previously, in Resolution No. 143/NQ-CP dated September 17, 2024, the State Bank was assigned to direct commercial banks to restructure the term and maintain the customer debt group to restore production and business after typhoon Yagi according to current regulations.

Based on the regulations and instructions of the Government, the issuance of a Circular regulating the restructuring of debt repayment terms by credit institutions and foreign bank branches is urgent to implement the direction of the Government in Resolution No. 143/NQ-CP.

According to the draft, credit institutions will consider restructuring the debt repayment term for the outstanding principal and interest based on the customer's request and the organization's financial capacity. The Circular applies to debts arising before September 7, with the obligation to repay principal and/or interest from September 7 to December 31, 2025.

The debt repayment term restructuring review shall be carried out within the first 3 months from the effective date of the Circular, and the repayment term restructuring period shall not exceed one year. The final repayment date of the restructured loan shall depend on the customer's difficulty level but shall not be later than December 31, 2026.

Within the first ten days of each month, credit institutions (except for people's credit funds) and foreign bank branches must submit a report to the State Bank on implementing debt repayment term restructuring as of the end of the previous month.