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Imports slow down on ‘severe credit crunch'
Vietnam’s import growth slowed in October as companies were hit by ‘severe’ difficulties in raising money, slowing the widening of the trade deficit.
Imports rose 43 percent through October to US$70.1 billion, down from a 48 percent rate of expansion through September, according to preliminary figures released Thursday by the General Statistics Office (GSO) in Hanoi. The estimated trade gap from January to October is $16.3 billion.
The government has told banks to restrict lending this year after the International Monetary Fund warned in June that rapid credit growth was contributing to an overheating economy.
This week the State Bank of Vietnam (SBV) cut its benchmark interest rate, with the European Chamber of Commerce saying the move was needed to revive a “frozen” lending market.
“The trade deficit in Vietnam is all based on credit, and the government slammed on the brakes on credit very hard around the end of the first quarter,” said Fiachra MacCana, head of research at Ho Chi Minh City Securities Corp. “Companies are now facing a very severe credit crunch.”
The deficit increased 66 percent from the same time a year earlier. Exports climbed 37 percent through October to $53.8 billion, down from a 39 percent rate through last month, the GSO said.
Threat to economy
The trade gap’s previous “rapid” increase had threatened economic stability, SBV Governor Nguyen Van Giau said last week. The shortfall has shown “significant signs of improvement,” helping to provide support for the dong since mid-year, Morgan Stanley said in a report this week.
“The wind behind imports is fading,” wrote Bill Stoops, head of research at Dragon Capital in Ho Chi Minh City, in a note sent to investors last week. “Credit is so dear.”
The prospect of slower global growth or a recession will make it more difficult for Vietnam to maintain strong export growth in coming months, HSBC Holdings Plc said in a note this week. Vietnam is targeting 18 percent export growth next year, the Ministry of Industry and Trade said Wednesday.
Exports “will come under much greater pressure,” because about half of Vietnam’s overseas shipments go to major developed markets, wrote Daniel Hui, a foreign-exchange strategist at HSBC in Hong Kong.
Oil, steel
Oil shipments climbed 43 percent by value to $9.5 billion, while slipping 10 percent by volume. Crude oil prices have averaged 64 percent more this year than during the same period in 2007.
Garment exports rose 20 percent to $7.6 billion. Higher costs for raw materials and the global economic slump may cause Vietnam’s garment industry to miss its export target for the year, Viet Nam News reported last week.
On the import side, purchases of machinery and equipment rose 33 percent to $11.6 billion, while
import of petroleum products climbed 71 percent by value to $10.3 billion. Steel imports advanced 57 percent to $6.1 billion.
“Vietnam still has to import a huge amount of capital equipment to build roads and factories to make the transition to the normal model of the Asian exporting economy,” said MacCana of Ho Chi Minh City Securities. “I never bought the argument that Vietnamese imports were for consumer purposes.”
Thanhnien
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