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Cooling import levels to take heat out of the trade deficit
Vietnam’s trade deficit will fall by half this year as imports slow down. The Ministry of Industry and Trade (MoIT) predicted that Vietnam would see a trade deficit of about $9.15 billion this year, down from $17.5 billion in 2008.
The main reason for the narrowing trade deficit was because of an anticipated import volume of $80 billion this year, roughly the same to 2008, while export growth rate is expected to hit 13 per cent to $70.85 billion in 2009, according to the MoIT’s Trade Promotion Department.
The government’s recent strong measures to deal with imports such as raising import tariffs on several kinds of consumer goods and the dong-dollar exchange rate would significantly help get imports under control, said Former Minister of Trade Truong Dinh Tuyen.
“One of the most important tasks [for Vietnam] this year is to control imports in order to reduce the trade deficit,” Tuyen said, adding that the current trading band between the dong and dollar was proper to help spur exports while controlling imports.
In late March, the State Bank widened the currency’s trading band from 3 to 5 per cent. “Importers, particularly those wish to buy consumer goods from overseas will be discouraged since the price of imports will become relatively more expensive than those produced in Vietnam,” Tuyen explained.
He said the imports of machinery, equipment and technology for local production would not be affected by the foreign exchange policy since the importers could enjoy a 4 per cent interest rate subsidy from the government’s stimulus package.
Vietnam’s imports fell 45 per cent to $11.8 billion year-on-year in the first quarter of this year. The imports of major products reduced such as steel down 71 per cent, automobiles 63.5 per cent, cotton 59.2 per cent, paper 34.4 per cent, chemicals 31.3 per cent, machinery and equipment 30.2 per cent, dairy products 20 per cent, oil products 17.7 per cent and cloth 15.5 per cent.
In late March, local authorities raised import taxes on meat and poultry products to discourage imports and protect domestic anufacturing. Import tariffs on steel billets and steel products were also raised. “As Vietnam’s exports have been negatively affected by the declining overseas demand, the government’s efforts to trim down imports are necessary to reduce trade deficit,” said Duong Thu Huong, general secretary of the Vietnam Banks Association.
She noted that foreign currency sources including Foreign Direct Investment (FDI), foreign portfolio investment, official development assistance and overseas remittances would be lower this year. The Ministry of Planning and Investment recently refreshed its forecast on disbursed FDI this year to around $8 billion, 31 per cent lower than the last year’s reported figure.
vietnamnet, vir
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