Increasing trade deficit a “positive” sign

In the context of the current gloomy economy, the increase in the trade deficit indicates that some businesses are continuing to operate well.

  • Trade deficit rises in five months
  • A third scenario for national economy?
  • Declining demand slows down economic growth
  • Not all businesses hit the wall

    The statistics on Vietnam’s exports and imports in the first five months of this year reflect the troubles facing the macroeconomy. In addition to the global economic crisis, these difficulties can be attributed to  high interest rates, the tightening capital supply, falling consumption and demand, and the dissolution of many businesses.

    Capital shortages in particular are causing businesses to be more careful when importing raw materials, which seriously affects domestic production. The index for industrial production in the first quarter of 2012 rose by only 4.1 percent, much lower than during the same period in 2011.

    According to the General Department of Vietnam Customs, total exports of goods in the first three months of 2012 hit US$24.58 million, representing a low year-on-year increase of 4.8 percent.

    However, it also reported that the import of materials hit US$13.2 billion, up 12 percent against last year’s period, which indicates that not all enterprises are hitting snags.

    Heavy industry material imports up, light industry imports down

    The Vietnam Industry and Trade Information Centre under the Ministry of Industry and Trade said in the first quarter of 2012, imports of machinery for heavy industry increased sharply by 19.9 percent to US$265.1 million.

    Imports of spare parts and machinery for all sectors also experienced growth, including automobile assembly (up 38.4 percent against least year’s period), automation (up 91 percent), mechanical engineering (up 75.4 percent), steel (up 152.7 percent), and ship building (up 36.8 percent).

    Meanwhile, imports of machinery and spare parts for light industries decreased by US$34.5 million (14.2 percent) to US$209.5 million in the first quarter.

    The plastic and rubber sector still accounted for the largest proportion of imports with 82.1 percent.

    Imports of equipment and materials for the wood product sector and animal feed production saw extremely impressive year-on-year growth of 429.3 percent, while those for textiles and garments decreased by 30 percent.

    Trade deficit as a positive sign

    The General Statistics Office (GSO) under the Ministry of Planning and Investment estimates that Vietnam’s import surplus reached US$700 million in May, higher than the total trade deficit in the first four months of 2012.

    Unlike in previous years when an export surplus was considered better than an import surplus, this year’s figure represents a positive sign, especially when production remains at a standstill and an increasing number of businesses are being dissolved.

    Furthermore, the increasing material and equipment imports for domestic production reflect the recovery of Vietnam’s industrial sector.

    The Vietnam Industry and Trade Information Centre has predicted that import revenues for important production materials will continue rising in the second quarter of 2012 and is expected to boost domestic production.