Vietnam 2010 trade gap seen At $13.5 Bln

Vietnam on Wednesday projected a stubbornly wide $13.5 billion trade deficit this year despite a rise in exports of 19.1%, three times the initial target, adding to pressure on the authorities to devalue the dong again.

Vietnam on Wednesday projected a stubbornly wide $13.5 billion trade deficit this year despite a rise in exports of 19.1%, three times the initial target, adding to pressure on the authorities to devalue the dong again.

Prime Minister Nguyen Tan Dung, reading a report to the opening session of the National Assembly, also forecast economic growth of 7.2% in the fourth quarter from a year before, after 7.16% in the third quarter.

The government report seen by Reuters forecast gross domestic product would rise next year by between 7% and 7.5%, following a projected 6.7% this year.

This year’s projected trade deficit would be up 9.8% from the $12.3 billion gap in 2009. A Reuters poll of 12 economists this month had forecast $12.2 billion for this year.

Vietnam’s large trade and budget deficits, plus low foreign exchange reserves, make it vulnerable to another devaluation in the dong VND=, which is pegged to the U.S. dollar.

The central bank devalued the currency on Aug. 17 for the third time since November, cutting the reference rate by 2% in what it said was a bid to control the trade deficit.

Speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

State Bank of Vietnam Governor Nguyen Van Giau was quoted on Tuesday as saying the central bank had no plans to adjust the rate even though the dong has been dropping on the unofficial market, according to a state-run newspaper.

Inflation would be at around 7% in 2011, the government report said. The government is aiming for 8% this year.

With imports in 2010 seen climbing 16.5%, the trade deficit would stay below 20% of the country’s export revenue, it said.

The government targets for 2011 need approval by parliament, which had approved a target for exports to grow 6% this year.

Dung said he expected foreign debt this year to rise to 42.2% of gross domestic product from 30% last year. Government debt would be 44.5% of GDP while public debt would hit 56.7% of GDP, he said in the report.

Vietnam’s credit growth is expected to be 25% this year and money supply (M2) would grow 20% from 2009, fuelling economic growth of 6.7% for the whole year, Dung said.

He estimated the bad debt ratio for the whole of 2010 would be kept below 3% of loans, against 2.03% at the end of 2009.

The annual trade deficit for 2011 would be kept at less than 20% of exports, while the budget deficit would be 5.5% of GDP, Dung said in televised remarks.

Vietnam’s investment for development is projected to be equivalent to 40% of GDP in 2011, slightly lower than this year when investment would jump 12.9% from last year and make up 41% of GDP.- Reuters

Tags: Vietnam trade, Vietnam trade deficit 2010