Officials say trade deficit not cause for concern, yet

11:14 | 23/07/2019 Trade

(VEN) - After maintaining a trade surplus in 2018, Vietnam faced a deficit in the first five months of 2019. However, economists believe that for now, the trade deficit is not a cause for concern. 

officials say trade deficit not cause for concern yet

Further efforts are being made to promote exports

Imports mostly for production

Ministry of Industry and Trade (MoIT) data show that Vietnam’s export value in the first five months of 2019 reached an estimated US$100.74 billion, up 6.7 percent compared with the same period last year; the import value reached an estimated US$101.28 billion, up 10.3 percent. These results yielded a trade deficit of US$548 million.

The MoIT’s Agency of Foreign Trade attributed the deficit to increased machinery imports because of expanded foreign direct investment (FDI), which led to higher demand for import of technology, machinery, equipment and production materials. The import of production materials accounted for 88 percent of total import value in the first five months.

The import of crude oil and coal for oil refining projects and thermal power plants soared. Businesses also promoted the import of computers, electronic components and machinery.

Dr. Vo Tri Thanh, former director of the Central Institute for Economic Management, said the 6.7 percent export growth in the first five months of 2019 was a lower result compared with the same periods in previous years. However, this was a satisfactory result compared with the negative growth recorded by Japan, Indonesia, Chinese Taipei and Singapore in the first three months. He agreed with the assessment that the five-month trade deficit is not expected to be a worry because it was the result of increased import of production materials.

Better results towards year’s end

The Viet Dragon Securities Corporation (VDSC) recently released a report indicating optimism about Vietnam’s trade balance, especially from the third quarter of 2019. VDSC expects the export value will increase and the import demand will decrease due to seasonal reasons and state control. The export of agricultural and electronic products, which account for nearly 40 percent of total export value, is expected to grow more robustly. Fruit exports to China also promise growth, reaching more than US$450 million in April, an increase of nearly 30 percent compared with March and the same month last year.

Major electronic manufacturers also often expand production and launch new product lines in July or August. The VDSC report shows increases in the production index and import value of the electronics sectors of Thai Nguyen, Bac Ninh, Vinh Phuc, Hanoi, Ho Chi Minh City and Hai Phong in May 2019.

According to Tran Thanh Hai, Deputy Director of the MoIT’s Agency of Foreign Trade, the agency has provided businesses with guidance to enable them to benefit from preferential rules of origin in free trade agreements. In the first five months of this year, the agency provided businesses with nearly 500,000 sets of self-certification documents. It has publicized and is developing two projects, one of which is to combat fraud related to the origin of import-export goods, and the other project is to set criteria for made-in-Vietnam products. These projects are expected to provide export companies with stronger support.

At a recent meeting of the MoIT, Deputy Minister of Industry and Trade Hoang Quoc Vuong emphasized that Vietnam faced a trade deficit in the early months of 2019 due to increased import of machinery, equipment and production materials. However, he said, the trade deficit also served as a warning for the MoIT of the need to make greater efforts to achieve better export results during the rest of the year.

Deputy Minister of Industry and Trade Hoang Quoc Vuong:

The MoIT’s Agency of Foreign Trade is responsible for assessing opportunities and proposing solutions to help

businesses boost exports in the context of numerous difficulties facing the global economy.

Phuong Lan