Vietnam’s trade deficit in the first 2 months was normal

VCN – In the first two months of this year, Vietnam has faced a return to trade deficit. Is this unusual and does it raise concerns? In the whole year 2019, will Vietnam still maintain the momentum of trade surplus as it has got in recent years...? The reporter from the Customs Newspaper had an interview with Assoc. Prof. Dr. Pham Tat Thang (photo) - Senior researcher of the Trade Research Institute (Ministry of Industry and Trade) about this issue.
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vietnams trade deficit in the first 2 months was normal
Assoc. Prof. Dr. Pham Tat Thang - Senior researcher of the Trade Research Institute (Ministry of Industry and Trade)

After 3 consecutive years of trade surplus (2016-2018) and trade surplus in the first month of 2019, in February 2019 as well as in the first 2 months of the year, Vietnam returned to trade deficit. What is your assessment of this issue?

In fact, looking at the whole economy and the relationship with the global economies, nowadays, Vietnam is still in the state of trade deficit. Vietnam has had a trade deficit for a long time, even there were periods that Vietnam's trade deficit in the following year had been higher than the previous year. Therefore, the Government set a goal to achieve a trade balance by 2020. However, right in 2017 and 2018, Vietnam not only got the balance, but also reached a great trade surplus. Many people estimated that this had been an amazing phenomenon, a great achievement of the economy. But in fact, the trade surplus is unsustainable, has not become the regular, stable trade balance of the economy.

Vietnam is still in the state of trade surplus occurring in FDI enterprises, agricultural products, and trade deficit occurring in 100% domestic capital enterprises. The reason for Vietnam's trade surplus is because the FDI enterprises have a big trade surplus. Besides, the agricultural products are still sold well. Meanwhile, Vietnam is reforming the system of 100% domestic capital enterprises, especially state-owned ones, so the amount of imports are less.

Here, the trade surplus phenomenon only brings benefits, which are the supply of foreign currency and the softer control of exchange rate relations. The trade deficit can return at any time. In particular, if you look short term, a month, a quarter, it is precarious, changeable. Therefore, Vietnam's trade deficit in the first 2 months of this year is quite normal.

In your opinion, what is the direct cause of the trade deficit return in the first 2 months?

So far, Vietnam has been able to achieve export surplus, the trade surplus has occurred in 100% foreign-owned enterprises and agricultural areas. In the first 2 months of the year, agricultural exports were not very positive. Besides, the beginning of the year was not the time when the 100% foreign-owned enterprises had many export products. This made the trade deficit return.

As of the end of February, Vietnam has still mainly imported from China. In the long run, does this become more worrying, sir?

Recently, there were periods of trade deficit with the Chinese market behind the Korean market, but the Chinese market is still the largest trade deficit market of Vietnam. So far, Vietnam has not taken any measures to substantially change this. The trade deficit from China may even be higher in the coming time. The reason is that if the trade war between the United States and China breaks out fiercely, the investment, the sale of technology, the sale of factories from China to Vietnam will grow, pushing up the trade deficit from China. It is necessary for Vietnam to pay attention to that, at the same time promote and make good use of the Free Trade Agreements (FTAs) to increase trade deficit from other markets such as Korea, EU... In addition, China is a large market. If Vietnam can bring its products inland through Chinese distribution systems, it will be able to resolve the problem of stable trade relations between Vietnam and China.

This year, can Vietnam maintain the momentum of trade surplus like 2018? And what is the feasible solution to make Vietnam's trade surplus stable and sustainable, sir?

At present, it is very difficult to make an accurate forecast; it only can said that the trade deficit or trade surplus of Vietnam’s economy still reverses very quickly. That's because there is an unknown factor, which is how the China-US trade war impacts on the global economy and Vietnam's economy.

The goal of balancing the trade balance, even the sustainable export surplus can only be achieved when the 100% domestic capital enterprises have restructured to balance the trade balance in their enterprises, then the general trade balance is sustainable. Moreover, it is necessary to focus on developing clean agriculture, organic agriculture for sustainable export to the global market.

Thank you Sir!

According to the General Statistics Office (Ministry of Planning and Investment), generally, for the first 2 months of the year, the export turnover was estimated at 36.68 billion USD, up 5.9% over the same period in 2018. Regarding import, the total value was estimated at 36.76 billion USD, up 7.5% over the same period last year. The remarkable point of import and export was that while in January Vietnam still maintained the trade surplus with 816 million USD, in February it recorded the trade deficit of 900 million USD. Therefore, in the first 2 months, Vietnam had a slight trade deficit of 84 million USD.
By Thanh Nguyen/ Binh Minh

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