Is the trade deficit still hot?

Exports on hold, imports increase

Trade deficit reached approximately US$1.75 billion in the first two months of this year. According to the General Statistics Office of Vietnam, imports in February are estimated at US$3.9 billion, down 22.2 percent compared to January, bringing the total exports in two months to US$8.9 billion in a relative annual increase of 0.1 percent over previous years.

There is a slight increase in exports thanks to rising key products, such as garments (US$1.5 billion, up 16.8 percent), footwear (US$682 million, up 4 percent) and seafood (US$543 million, up 19.2 percent). Some products declined in both volume and value, such as crude oil (US$793 million, down 15.4 percent in value and 51.3 percent in volume), rice (US$437 million, down 6.8 percent in value and 24.9 percent in volume), and coffee (US$343 million, down 26.8 percent in value and 21.1 percent in volume). The decline made export value for two months remain static.

In the reviewed period, imports increased by 39.6 percent to US$10.7 billion with items for production such as machinery, equipment and tools up 14.5 percent to US$1.9 billion, petroleum up 20.1 percent to US$939 million and steel up 34.6 percent to US$616 million.

Imports of automobiles in the first two months are estimated to reach US$377 million at a relative annual increase of 115.3 percent.

The Ministry of Planning and Investment said that rising imports are due to price hikes, which have made imports increase by US$600 million.

Joint efforts to reduce trade deficit

According to Deputy Minister of Trade and Industry Nguyen Thanh Bien, Vietnam’s trade turnover is likely to rise in the coming months. He predicted the export turnover in March will reach nearly US$5.5 billion, up 48.6 percent over the previous month. March’s imports are predicted to hit US$6.4 billion, up by 45.5 percent, therefore the trade deficit will be maintained at approximately US$900 million. As a result, the export turnover in the first quarter of this year is expected to reach US$14.2 billion, while the import turnover will grow by 16.8 percent. The trade deficit will be valued at about US$2.6 billion, accounting for 18.3 percent of the country’s total export turnover.

In a recent press briefing, Deputy Minister of Finance Tran Van Hieu revealed that his ministry will review and restructure the list of import items, especially luxury products, including automobiles, motorbikes and cosmetics, in order to reduce trade deficit in the near future. “It is essential to control the import of these products to ensure trade balance,” he said.

Earlier, The General Department of Customs adjusted prices for some products to manage the risk of price hike. Accordingly, the prices of several products, including mobile phones, imported wines, cosmetics, automobiles, motorbikes, construction glass and fabrics, were adjusted.

Meanwhile, tariff barriers and technical barriers are also being built to limit the import of low-quality products. However, the application of technical barriers when Vietnam’s technology cannot yet meet practical goals may cause a negative impact on domestic production if the country does not consider every measure carefully.

Deputy Minister Nguyen Thanh Bien has proposed a number of measures to boost exports, such as the adjustment of the exchange rate between the Vietnamese dong (VND) and the US dollar (USD), and the repricing of several farm products to support farmers and businesses.

Recently, the Ministry of Trade and Industry has cooperated with the Vietnam Food Association to consume one million tonne of rice for reserves from the Mekong Delta region to stabilise the price of rice. The Ministry of Agriculture and Rural Development purchased coffee for reserves to prevent a reduction in the coffee price as occurred in 2009. Relevant ministries and agencies have also boosted trade promotion and negotiations with trade partners to sign export contracts.