More Careful with Q2 Export

The Ministry of Industry and Trade said Vietnam earned US$42.86 billion from exports in the first five months of 2012, up 24.1 percent year on year. Trade deficit was US$622 million, equal to 1.45 percent of exports in the reporting period - the lowest rate in many years.

 

The country witnessed a drop in many exports. The export value of agricultural, forest and aquatic products was more than US$6.45 billion, down 1.3 percent. Many key exports were in steep decline like coffee (down 7.8 percent), rice (27.8 percent), and rubber (8.3 percent).

 

In addition, fuel and mineral exports slumped 1.2 percent to US$3.8 billion. Coal earnings shed 12.2 percent, crude oil revenues slipped 3.1 percent, and ores and other minerals dipped 4.5 percent.

 

Chemical export plunged 36.5 percent, fibre and yarn export tumbled 9.9 percent, iron and steel shipment dived 16.4 percent, other metals fell 8.8 percent, cameras and camcorders decreased 4.4 percent; electric wires and cables dwindled 38.6 percent.

 

Apparel exports are still on the rise but order shortfalls are worsening. Most companies have orders for second quarter operations and a few have orders for third quarter delivery. In addition, fibre companies are facing more difficulties after import tax on cotton was lifted from zero to 10 percent.

 

Footwear companies also confronted difficulties in export (only a few have orders for second quarter production.) In addition, changes in import, purchase methods, higher quality demand, environmental standards and corporate social responsibility from the EU, US and Japan also affect Vietnam’s footwear export. Therefore, sneakers output was estimated to reach 99.9 million pairs in the first four months, down 3.9 percent over the same period. In 2011, Vietnam’s exports soared thanks to price increases. However, this advantage is being lost because prices of some commodities are falling. Cashew nut prices sank 5 percent, cassava prices dropped 13.6 percent, rubber prices plunged 31 percent, coal prices slid 7.2 percent, fibre and yarn prices dived 23.6 percent, iron and steel prices went down 4 percent.

 

Trade deficit to export ratio (1.45 percent) is the lowest since Vietnam entered the WTO five years ago. In particular, trade deficit from restricted items were US$1.72 billion, down 13.1 percent and equal 5.1 percent of exports.

 

Vietnam spent over 80.5 percent on imports from other Asian countries in the first four months of 2012. Imports from ASEAN and Africa fell.

 

Importation of raw materials for apparel - textile production shrank in both volume and value. Cotton import decreased 35.7 percent in value and 10.2 percent in volume. Fibre import dived 19 percent in value and 4.8 percent in volume. Fabric import declined 6.8 percent in value. Mr Le Tien Truong, Deputy General Director of Vietnam National Textile and Garment Group (Vinatex), said trade deficit incurred by the apparel - textile industry is at alarming rate because the demand from importers dropped, forcing domestic producers to scale down operations.

 

Vietnam’s major suppliers, namely China, Singapore, Japan, and Thailand, are limiting their exports. Apart from prices, the drop in imports is resulted from contracting domestic production.

 

Although trade deficit fell sharply in the first quarter, this was not seen as a good sign because it signalled stagnation. Trade deficit carries a positive meaning only when exports increase in value, markets expand in scale and foreign exchange rates are unchanged.