Trade deficit numbers deceive

A cooling recent trade deficit is unlikely to be sustained as import-export mechanisms require more work.
July marked the lowest monthly trade deficit of 2011 hitting $200 million, equivalent to 2.4 per cent of total export turnover, according to the General Statistics Office (GSO). The trade deficit in the seven months of this year was $6.64 billion, equivalent to 12.9 per cent of total export turnover.
“The re-export of gold was a key reason for the trade deficit reduction,” GSO said in a report.
If gold was excluded, the GSO estimated the deficit till the end of July was $8.4 billion, equivalent to 16.9 of total export turnover.
According to the GSO, gold was increasingly exported as traders cashed in on rising global gold prices that exploded nearly 10 per cent in 30 days till August 4, 2011.
Nguyen Minh Phong, economist at Hanoi Institute for Socio-Economic Development Studies, said this trend could not be sustained as Vietnam’s gold reserves were not big.
“The trade deficit will bound back in next months when the volume of gold export reduces and traders start importing gold for local demand. There is no sign for a sustainable reduction in the trade decifit,” he said.
Vietnam’s unreasonable production structure has seen the country labour under weighty trade deficits for two decades.
While Vietnam has to import most of its input materials, equipment and machinery for production and investment, most of its export products are unprocessed agricultural products, minerals and low-value industrial products. Those export products account for 84 per cent of the country’s total export turnover during January-July, according to a Ministry of Industry and Trade (MoIT) report.
The report also points out imported materials, equipment and machinery make up 81 per cent of total import turnover, a 24 per cent year-on-year increase.
Nguyen Van Nam, former head of Vietnam Institute for Trade, said these figures showed that Vietnam relied more on imported materials, equipment and machinery from other countries, especially China.
Vietnam Customs statistics indicate that China has continuously been the largest exporter to Vietnam with $11.1 billion in the first seven months of this year, accounting for 22.4 per cent of Vietnam’s total import turnover. Vietnam’s export turnover to China during the period is just $4.588 billion.
Although the goverment announced to curb the trade deficit by limiting unnecessary imports and pushing local production for exports, analysts said this measure was insufficeint. The more enterprises increase production, the more they have to import input materials and equipment.
“The trade deficit issue comes from the country’s production structure which we should change. One important thing is that the government must have measures to encourage enterprises to produce import substitutes,” said Nam. – VIR

Tags: Vietnam trade, Vietnam trade deficit 2011

Posted by VBN on Aug 8 2011. Filed under Import-Export. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry