Trade deficit fears still lurk

The government last week reported to the National Assembly, which is gathering in its eighth meeting in Hanoi, that the country’s trade deficit would reach around $13.5 billion this year.

Vietnamese need to curb their appetite for expensive imports

The figure is higher than the $12.5 billion the Ministry of Industry and Trade (MoIT) predicted in late October.

High trade deficits over the years have raised concerns among local economists and National Assembly members, who have said that it is the major cause for Vietnam’s current account deficit, which was the sum of balances of trade, net factor incomes and net transfer payments.

According to National Assembly Economic Committee chairman Ha Van Hien the $13.5 billion in trade deficit was large,despite the fact that it was equal to less then 20 per cent of the country’s export revenue as expected by the government.

“If the value of precious gemstones and gold exports are excluded from the country’s overall export value, the trade deficit would be much higher,” Hien said.

Available MoIT statistics showed that Vietnam would export a total of $2.5 billion worth of gemstones and gold, while importing $550 million worth of those goods this year.

“Excluding exports of gemstones and gold, Vietnam will incur a $15.45 billion in trade deficit this year, equalling 23.6 per cent of its export value,” Hien said.

“Long-lasting high trade deficits through years has made the country’s foreign exchange reserve decrease, while increasing the national debt and creating pressure on the Vietnamese dong to fall in value,” Hien said.

He said current account deficits together with state budget deficits and increased public debt would be big constraints for Vietnam’s future economic growth.

According to the government’s report, trade deficit was predicted to increase to $14.6 billion next year. Trade deficits were reported at $12.8 billion in 2009, $18 billion in 2008 and $14 billion in 2007.

Tran Du Lich, head of the Ho Chi Minh City Economics Institute, said that such high trade deficits would make it difficult for Vietnam to maintain its local currency’s value.

In the first 10 months of the year, Vietnam imported a total of $67.3 billion worth of goods, up 20.7 per cent from last year’s same period.

MoIT data showed that imports of raw materials, machinery, equipment and other necessary products worth an accumulative $55 billion in the January-October period were up 18.8 per cent on-year.

Imports of other goods that have been put under control, including gemstones, gold, confectionery, corn and motorbike components. Overseas buying of other consumer goods also saw a 22.4 per cent increase in value in the first 10 months, to $4.2 billion.

The MoIT has anticipated that Vietnam’s import value for the whole year will be around $82.5 billion, up 18 per cent from last year.

“The National Assembly’s Economic Committee requested the government adopt more decisive and stronger controls over imports, particularly luxury goods and those that can be supplied from local producers to curb the trade deficit,” Hien said.

The committee also required the government’s efforts to keep next year’s deficit to be the same as 2010’s figure.