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Rating agency welcomes slowdown in imports
The latest trade data may be a sign the economy is getting back on track.
Vietnam’s slowdown in imports indicates the government’s efforts to stabilize the economy may be working, damping concerns the country is facing a currency crisis, according to a report by international ratings agency Moody’s Corp.
Vietnam imported US$6.8 billion worth of goods in June, according to preliminary government figures, from $7.9 billion in May.
Imports may have slowed due to a package of measures including interest rate increases, according to a report from Moody’s Economy.com, a unit of New York-based Moody’s.
“The slowdown in import growth, albeit mild, is a welcome sign to the Vietnamese authorities,’’ wrote Sherman Chan, a Sydney-based economist at Moody’s Economy.com.
“The deceleration in imports during June is an early sign of success.”
Some investors have been anticipating a currency crisis in Vietnam, as import growth outpaced the rate at which exports expanded, Chan wrote.
“There were widespread concerns about a looming current-account crisis,’’ she said.
“As downward pressures on the Vietnamese dong have also intensified, the market was anticipating a currency crisis.
However, the central bank stepped in, despite being a bit late, and implemented some aggressive monetary tightening.’’
The trade deficit in the six months through June widened to $14.8 billion, up from $5.2 billion a year earlier.
The shortfall increased at a slower pace than in May.
The country needs to maintain a trade deficit of less than $20 billion and an export growth rate of at least 28 percent this year in order to curb inflation by the end of 2009, Deputy Prime Minister Hoang Trung Hai said this week.
Dong concerns
Signs the deficit will stop swelling may ease investor concerns about an overheating economy in Vietnam, Standard & Poor’s said last month.
Vietnam needs to make serious efforts to control a “ballooning” trade deficit that may weaken the dong, Calyon, the investment banking unit of Credit Agricole SA, said in June.
The State Bank of Vietnam last month raised its benchmark interest rate to 14 percent from 12 percent.
The third increase in borrowing costs this year and sales of dollars helped the dong strengthen in the so-called grey market, according to investment fund Dragon Capital.
The dong fell to VND16,846.50 per dollar Thursday, from VND16,845.50 late Wednesday, according to data compiled by Bloomberg.
The central bank set an official rate for the dong at VND16,518 versus the dollar, compared with VND16,521 Wednesday, according to its website.
The currency is allowed to trade by up to 2 percent on either side of that rate.
“The dong was at all times well above the non-deliverable-forward rates that investment banks have been so focused on,’’ Bill Stoops, head of research at Ho Chi Minh City-based Dragon, said in a July 4 note to investors.
Traders are pricing in an 18 percent decline in the coming year to VND20,500 per dollar, according to offshore 12-month non-deliverable forwards.
Forwards are agreements in which assets are bought and sold at current prices for future delivery.
Non-deliverable contracts are settled in dollars
Thanhnien
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