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Vietnam Suffers 340% Year-on-year Growth in Trade Deficit in 2015 Q1

Despite rise in deficit, figures seen as actually representing medium-term investment in future economic growth.

Photo: Changes to Vietnam’s economic cycle.
Changes to Vietnam’s economic cycle.
Photo: Changes to Vietnam’s economic cycle.
Changes to Vietnam’s economic cycle.

Vietnam ran up a US$2.4 billion trade deficit in the first three months of this year. This represents a 340% drop compared to its $1 billion trade surplus over the same period of last year.

For 2015, Vietnam recorded a deficit of $361 million in January alone. This grew to $1.21 billion over the January-February period, as import levels accelerated well beyond that of exports.

While total exports reached $36.3 billion – up 8.8% year-on-year – imports totalled$38.7 billion, surging 20.1 % year-on-year. More specifically, the total export and import turnovers of foreign-invested enterprises (FIEs) topped $48 billion, up 22.6% ($8.9 billion) compared to the same period last year.

Overall, the earnings of FIEs accounted for 64% of the total export and import revenues of the country. By comparison, revenues from crude oil and agricultural commodities, including coffee and seafood – once considered the primary assets of local exporters – decreased 10%-15% compared to the first quarter of last year. This was largely due to both significant falls in price and a drop in export volumes.

Despite this, six key export groups actually saw a significant increase. This particular list was topped by shipments of telephones and accessories ($6.7 billion), followed by garments and textiles ($4.9 billion) and computers and accessories ($3.6 billion).

Heading the list of imported products over the first quarter of 2015 was machinery and equipment ($7 billion). This was up a massive 45.8% ($2.2 billion) compared to figures for the same period last year. Computers and components came in second ($5.6 billion), up 34%.

While the trade deficit was cited by local media as a rising concern for the national economy, it may not be as pressing a problem as it first appears. With the shortfall largely caused by the importation of machinery and production equipment, some commentators have seen this as a positive indicator for the long-term health of the economy.

FIEs actually earned $24.53 billion in export revenue in the first quarter, up 18.7%, while spending $23.66 billion on imports, a 27.1% annualised rise. Overall, then, FIEs brought in an $870 million trade surplus during the period, down 78% compared to the $3.9 billion trade surplus witnessed over the same period last year.

In the case of local firms, there was a collective trade deficit of $3.8 billion, a 31% year-on-year increase over the $2.9 billion recorded in Q1/2014. China continued to be the largest export market for Vietnam in Q1/2015 ($11.47 billion), while importing $3.54 billion worth of Vietnamese goods. This resulted in a trade deficit of about $8 billion in the PRC's favour.

The primary imports from China across the period were machinery, equipment, tools, spare parts, computers and components, telephones and accessories. There was also double-digit growth rates in the imported value of Chinese steel.

Within ASEAN, Vietnam also ran a trade deficit of $1.3 billion, as exports accounted for only $4.5 billion, while imports stood at $5.8 billion. On a more optimistic note, Vietnam had a huge surplus with the US and the EU markets during the first quarter of 2015 – totalling $5.3 billion and $4.7 billion, respectively. This was up 17% and 14.2% compared with the same period last year.

Nguyen Quoc Uy, Ho Chi Minh City Office

Content provided by Picture: HKTDC Research
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