Trade Surplus Causing Worry

According to Vietnam Customs, in the first quarter, export turnover increased by 24.2 percent year by year to US$24.805 billion. Eight commodities whose turnovers exceeded US$1 billion included: fishery, coffee, crude oil, wood and wooden furniture, textile and garment, computer, electronic products and components, phones and spare parts, others. Notably, we have experienced trade surplus of over US$224 million against estimated surplus of US$250 million.

 

Apart from export achievements, another factor contributing to the surplus was slowly increasing imports. In three consecutive months, import turnover exceeded US$24.58 billion, up by 4.8 percent year by year. Import value for machines, equipments, spare parts reached US$3.373 billion, that for computer was US$2.64 billion and petrol and oil and plastic material took US$2.12 billion and US$1.1 billion respectively etc.

Despite sudden trade surplus, economic analysts are still worried that this year’s export targets would be tough to meet due to difficulties in both key markets and national key export industries. It was expected that the export and the import values would be US$108.8 billion and US$117 billion in turn, which, if beaten, will make Vietnam one of 5 ASEAN top countries having total import-export turnover of more than US$200 billion (including Singapore, Indonesia, Thailand, Malaysia and Vietnam). However, the world’s economy hasn’t been fully free of instability. Dr Vo Tri Thanh, Deputy Director of Central Institute for Economic Management said that since the world’s economy and price both go down, export enterprises will face challenges.

 

Despite national orientation to reduce interest rate to assist enterprises, it is still high. Moreover, not only interest rate but also input price, labour cost, material source etc are obstructing businesses.

 

The question is put to the reason for significant increase in export turnover. It comes from FDI sector with export turnover, including crude oil, of US$15.5 billion, beating 63.3 percent, up by 43.1 percent. Excluding crude oil, FDI enterprises reached US$13.8 billion, increasing by 48.8 percent year by year. FDI still saw high growth rate and remained trade surplus for 8 consecutive months since August 2011. Meanwhile, export turnover in 100 percent domestically funded sector was only US$8.98 billion, staying still year by year. While export turnover of this sector for two first months only increased by 5.4 percent, for three months, it was equal to that in the same period in 2011.

 

Some key export products have faced difficulties. Coffee production in first months saw a decline due to unfavourable weather; a reduction in consumption also caused coffee export volume to go down by 58,000 tonnes year by year. The rice price saw no growth, hard consuming market, high inventory, which led a rapid reduction in export volume by 67.4 percent, or 818,000 tonnes. Besides, in mineral group, the coal had its price decreased strongly year by year, and export turnover down by US$66 million.

 

Vietnamese goods in the world market are seeing reduction in both price and quantity. In the first quarter of 2012, including increase and decrease in price and quantity of agricultural products and minerals, which have price and quantity considered, export turnover went down by US$ 296 million year by year.

 

Deputy Minister Nguyen Thanh Bien of Industry and Trade estimated that export figures have reflected difficulties for export status this year. There are signs of short stops in key export products originating from market difficulties such as textile and garment, rice, coffee etc.

 

Trade deficit, which has been an obsession for exchange rate for years and put much pressure on US dollar demand, now is brought to a stop. Since the first quarter 2009, Vietnam has seen trade surplus. However, eased worry about trade deficit, more foreign currency reserve raised a new concern. Since materials for productions and machines etc account for the majority in Vietnamese import good structure, a significant reduction in the import volume demonstrated difficulties in national industrial production, leading a reduction in import demand. This is an alarming sign for industrial growth in the remaining time this year.

 

For years, national industry relies on import due to low localization ratio; many industries are only of manual production and have materials and fuel fully depend on import. Reduction in import gave the signal of congestion in national production, for example, reduction in quarter 1’ import pointed out industrial decline in coming quarter. It also means that businesses are really facing an impasse in output and difficulties in production and trade.

 

Thus, it is really challenging to beat export growth rate of 13 percent, as set out by the National Assembly. GDP growth of 4 percent in the first quarter of 2012 is considered the plateau. The Government is implementing measures to rescue enterprises, support production and trade, in which currency policies are loosened, interest rate is oriented to reduce rapidly, especially agriculture and export sectors. If national economy escapes from such current sluggish status and world’s economy sees brighter signs, export will come back the impetus of high growth rate in the second quarter.