Exporters feel the pinch of high interest rate

Tightening monetary policies including high interest rate to curb inflation have strongly impacted the country’s export as May export growth was a mere 0.8%, said the Ministry of Industry and Trade in its regular online meeting on Monday.

May export revenue totaled only US$7.5 billion compared to US$7.44 billion in April, while May should be the month of export acceleration.

Phan Van Chinh, head of Import Export Department of the ministry, said the export growth rate in May was much smaller than that in previous months and differed from the normal course in many previous years. As usual, May, June and July see strong export revenue compared to other months of the year, Chinh added.

He pointed out this was the impact of tightening monetary policies resulting in high lending rate.

“Enterprises have managed to maintain production in the first quarter this year given material inventory but the impact will be strong in June and July as enterprises lack capital while lending rates at banks are too high,” Chinh said.

Cao Thi Ngoc Hoa, vice general director of the Vietnam Southern Food Corporation, told the online meeting that the company was facing difficulties with the cost for stocking 450,000 tons of rice with lending rate at above 18% per year.

“Our member rice exporters in the Mekong Delta say they are considering whether to buy the summer-autumn rice for stocking. This in fact will affect the average sales price. As exporters wait for contracts before buying rice, there are two scenarios that the rice price plunges when no exporters buy or strongly increases when exporters compete to buy rice,” she said.

Nguyen Binh Hien, vice director of rice trading company Mecofood in Long An Province, said his company was suffering from the stockpiling cost at an estimated VND200 per kilo due to high interest rate. His company is holding in stock an amount of nearly 3,000 tons, waiting for the delivery to some African countries under commercial contracts and to Malaysia under government-to-government contracts.

“I know some exporters have agreed to sell rice at a lower price than average in order to get rid of the burden of stockpile that they have made before,” he said.

Huynh Khanh Hiep, deputy director of HCMC’s Department of Industry and Trade, said that the city’s industrial production grew 12.5% in May, lower than 12.9% recorded in April and 13.6% in March.

“This is the result of high lending rate and increasing input material prices that make enterprises narrow manufacturing,” Hiep said.

Meanwhile, trade deficit is poised for rising and would be a threat in coming months as global prices are increasing which would make import expenditure in the rest of the year surge, according to the ministry.

“Maintaining import expenditure at US$9 billion a month is so difficult and controlling the trade deficit less than 16% of total export revenue was not an easy duty,” Chinh said.

At the online meeting on Monday, the ministry also fielded questions from enterprises over administrative barriers relating to the import of non-essential commodities like wines, cosmetics, mobile phones, and automobiles.

Minister of Industry and Trade Vu Huy Hoang told the meeting that current regulation of the ministry to restrict import by technical measures had been supported by other authorities including the Ministry of Transport and the Ministry of Justice.

“These are measures aiming to protect health and rights of consumers as well as to create trade balance, limit trade gap, and manage goods that are not encouraged for import,” he said. – SGT

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates