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Vietnam’s trade deficit ‘not alarming,’ Standard Chartered says
Vietnam’s trade deficit is “not particularly alarming” at current levels compared with early 2008, Standard Chartered Plc said, after the shortfall in October reached its highest monthly total this year.
The trade deficit widened to $1.9 billion in October from $1.8 billion in September and $1.3 billion in August. The shortfall must narrow to ensure sustainable economic growth, Moody’s Economy.com said this week, while Australia & New Zealand Banking Group Ltd. last week called the gap “worrying.”
Monthly trade deficits averaged about $2.4 billion during the first half of last year, peaking at $3.3 billion in March 2008. While faster economic growth is underpinning the recent deficits, commodity prices will help to limit the widening of the gap this time, Standard Chartered said, arguing that oil and steel prices are unlikely to reach 2008 levels.
“This will help to contain imports of refined petroleum products and steel, which both contributed significantly to Vietnam’s import surge in the first half of 2008,” Tai Hui, the Singapore-based head of Southeast Asian research at Standard Chartered, wrote in a note dated Wednesday.
“The newly added refinery capacity at Dung Quat will also help to reduce the country’s structural energy trade deficit, as it exports crude oil and imports refined products,” Hui wrote.
Vietnam opened its first crude oil refinery this year at Dung Quat Bay in central Vietnam.
Import decline slows
Vietnamese imports declined 22 percent in the 10 months through October, compared with a 25 percent drop in the nine months through September. Exports fell 14 percent through October, compared with a 15 percent retreat through September.
“The recent widening of the trade deficit can be largely explained by the rise in imports, whereas export performance has been stable,” Hui wrote. “Breaking down imports by product, automobiles, steel products, and electronic products have seen a visible pickup in import value. This is consistent with the pickup in domestic demand.”
The Vietnamese economy expanded 5.8 percent in the third quarter from a year earlier, up from 4.5 percent in the second quarter and 3.1 percent in the first.
Vietnam’s recent trade figures result from “increased economic activity”, VinaCapital Investment Management Ltd. said, describing the pace of acceleration in the deficit as “clearly unsustainable.”
Foreign investment and remittance inflows are likely to improve next year, helping Vietnam avoid any crisis in external payments, Hui wrote.
While a growing economy will drive Vietnamese imports next year “this should be partially offset by improved export performance as external demand, especially from Asia, recovers,” he said in the note.
thanhnien, Bloomberg
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