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Trade deficit hazards prove big headache
Despite analysts claiming Vietnam is on the right track to lessen its trade deficit, an export slowdown and rising imports are looming as dangers.
Nguyen Van Hoang, deputy director of the Ministry of Industry and Trade’s Planning Department, said the government’s fight against the widening trade deficit would face many difficulties. “Keeping the gap between imports and exports under $20 billion is a hard task,” Hoang said.
He said export growth would slowdown and import growth would accelerate in the last months of the year.
“We have seen a slowdown in export growth following the end of harvest for some agricultural products. In addition, Vietnamese manufacturers are facing financial difficulties, so they cannot further expand production for export,” said Hoang.
In August, the trade deficit stood at $900 million, pushing the trade deficit in the first eight months of the year up to $15.97 billion. This was the second month Vietnam’s trade deficit sat below $1 billion since the start of 2008. However, it was about $150 million higher than the trade deficit in July.
The deficit is currently considered the biggest danger to the economy along with rising inflation. Policy makers have blamed the problem on high global prices of input materials as well as on rising domestic demand for production equipment and consumer goods.
The government aims to keep the trade deficit this year under $20 billion and many measures have been applied, such as raising import taxes on certain non-necessities and boosting export growth. However, export growth showed signs of slowdown last month. In July, export turnover reached $6.5 billion and the number decreased to $400 million last month, reaching only $6.1 billion.
According to a General Statistics Office report, the export volume of certain goods fell last month compared with July. For example, the volume of exported coal dropped from 1.447 million tonnes to 1.3 million tonnes, rice from 497,000 tonnes to 450,000 tonnes, coffee from 65,000 tonnes to 60,000 tonnes and pepper from 10,000 tonnes to 9,000 tonnes.
Along with the reduction of export volume, export turnover of some key commodities also fell. The export turnover of rice last month was $340 million compared with $431 million in July, and coal fell from $174 million in July to $143 million in August. The report showed that exports grew 39.1 per cent in the first eight months of the year, but without including the price increase, growth really stood at only 21 per cent.
“High prices will not contribute much to export growth in the coming months any more than they did in the first half of the year. We can see that global prices of crude oil and foods are beginning to reduce,” Hoang said. He said the economic recessions in the United States and European countries were also negatively impacting the growth of Vietnam’s export markets.
A Ministry of Planning and Investment report showed that the market structure of Vietnam’s exports had changed in the last eight months. Unlike last year, South East Asian countries represented the largest market for Vietnamese goods while the US and European markets rank second and third respectively. “The government planned to narrow the trade deficit by boosting exports, but the slowdown of exports will make the target more difficult,” Hoang said.
While warning about falling export growth, he also expressed concern about the increase of imports in the coming months, saying that the rising demand of construction and consumer commodities would be serious factors.
“The government raised import taxes on autos and luxury goods, but the next few months will be a time for investors to boost their disbursement to construction projects, and the country will also have to import more commodities to meet the huge demand for the Lunar New Year and other festivals,” he said.
However, Planning and Investment vice minister Cao Viet Sinh said that the government still had the ability to meet the target if it “strictly restrains the importation of non-essential goods and helps exporters enhance their production”.
VNN
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