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Falling imports cut trade gap 85 percent in first half
Vietnam’s trade deficit narrowed in the first half, as companies slashed purchases from abroad amid the worst global recession since the Great Depression.
The shortfall shrank 85 percent to US$2.11 billion, from $14.39 billion in the same period a year earlier, the General Statistics Office said in Hanoi yesterday. Imports slumped 34 percent to $29.72 billion while exports fell 10 percent to $27.61 billion.
Vietnam’s trade gap may narrow this year for the first time since 2005, easing concerns about any balance-of-payments crisis, DBS Group Holdings Ltd. said last week. The balance was in surplus through April this year, before reverting to deficit. Vietnam has not posted a full-year trade surplus since 1992.
“The trade balance is still in better shape than at any point in the past two years,” wrote Joseph Lau, a Hong Kong-based economist at Credit Suisse Group AG, in a note released yesterday. “While deficits may persist for the rest of this year, Vietnam is still set to see its annual trade deficit roughly halve from last year.”
Still, the move back to a deficit is weakening the currency, based on free-market exchange rates, said Ho Chi Minh City-based fund managers Dragon Capital.
Financing questions
“Questions remain on the source of financing” for the trade shortfall,
Dragon said in a note yesterday that cited a rising fiscal shortfall. “The classic twin deficit has the currency under pressure.”
Vietnam’s trade balance is unlikely to return to a surplus this year, said Jonathan Pincus, an economist with the Vietnam Program at the Harvard Kennedy School in HCMC.
“Exports of previously imported gold drove the trade surplus before,” Pincus said. “That said, the trade balance in Vietnam is largely a function of imports by foreign companies, and so the overall deficit will certainly narrow from last year because foreign direct investment is down.”
Exports of precious metals reached $2.61 billion, up 633 percent from the same time a year earlier, with shipments in June alone totaling $12 million, the statistics office said. Gold exports were a primary driver of the trade surplus earlier in the year, DWS Vietnam Fund Ltd. said in a note sent this week.
Garment shipments dropped 1 percent to $4.08 billion over the period. Oil exports declined 42 percent by value to $3.31 billion. The average global price of crude oil fell 54 percent in the first six months of the year compared with the same period in 2008.
Coffee exports fall
Coffee exports fell 12 percent by value to $1.1 billion over the period.
“Vietnamese farmers remain well-financed and the weaker dollar is helping offset the pain of a lower robusta price,” Fortis Bank and commodities consultant VM Group said in a report this month. “They have thus been in no rush to commercialize their remaining stocks of the 2008-2009 harvest.”
On the import side, purchases of machinery and materials weakened 19 percent through June to $5.34 billion. Imports of cloth fell 1 1 percent to $1.98 billion, while purchases of plastics from abroad slipped 25 percent to $1.16 billion.
Purchases of foreign-made machinery, fabrics and plastics are probable indicators of future export growth, DWS Vietnam Fund said in its note.
“A lot of capital goods imports are healthy,” said Pincus. “What’s interesting is that foreign financial flows are slow and we are still seeing the trade deficit pick up. It’s too early to know if that’s a reflection of excess demand in the economy that’s spilling into consumer imports and public investment, which would be a concern.”
thanhnien, Bloomberg
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