Why Jan-May trade gap widened to $6.5b?

Along with inflation, trade deficit is widening and forecasted to rise highly in the last half of 2011. According to Ministry of Industry and Trade, in the first five months, Vietnam announced a trade gap of $6.5 billion.

The figure reflected inadequacies as from the start of this year, an array of measures to curb trade deficit have been released apart from monetary policies as well as tariff barrier, commercial technique.

As estimated, till the end of March 2011, the country’s trade gap was more than $3 billion that was doubled after only two following months. Trade gap now accounts for nearly 19% of total export turnover against the government’s 16% target.

The question was raised that which measures were released and whether Vietnam should offer special “medicine” to treat “trade deficit disease”.

Till now, the government, Ministry of Finance and Ministry of Industry and Trade have applied a series of policies such as stopping purchase of imported cars for public services; limiting imports of luxury goods such as car, mobile phone, wine, beer, tobacco, cosmetics; issuing the portfolio of commodities needed to be controlled and limited in imports…However, the policies have been less effective.

As explained by a representative of Ministry of Industry and Trade, such a high trade gap in Jan-May was attributed to increases in prices as well as import volume (which pushed import spending up $9.4 billion). In which, the input costs added $1.5 billion to Jan-May trade deficit.

More especially, the measures of curbing trade deficit mainly focused on groups of goods subject to limited and controlled portfolio. But the groups only account for 16.9% of total import expenditure while other groups including equipments, machines, materials for production and processing take up 83.1%. Clearly, the lawmakers missed some objectives needed to be controlled in order to reduce trade gap.

Economists said Vietnam’s trade gap was facing “dual-risk” including more value in import spending and less volume. For example, in the first 5 months, imports of petrol were over 5.14 million tons costing more than $4.5 billion.

Meanwhile, import volume in Jan-May only grew 15.6% year on year but the spending jumped 41%.

Also, the country is suffering “dual-risk” in crude export and import of refined products. For example, for many years, export of crude oil could offset imports of fuel. But in the first 5 months of 2011, crude oil export brought in only $3 billion (with the crude oil price increased 25%) while the import of fuel cost $4.6 billion (price of fuel products rose 32-40%).

Similarly, export price of rubber soared 25.5%, fibre +39.4%, cotton and other ordinary metals +110%, which explained that imports of Jan-May increased only $1.9 billion by volume but surged $7.5 billion by prices. – Vietbiz24

Posted by VBN on Jun 1 2011. Filed under Import-Export, Import-Export turnover. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry