Wednesday, March 20 2019

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Việt Nam’s trade deficit is back, but there’s no need to panic

Update: March, 13/2019 - 09:00
Phạm Tất Thắng. VNA/VNS Photo
Viet Nam News

Việt Nam attained a trade surplus in three consecutive years from 2016 to 2018. However, the trade deficit has returned in the first two months of this year. Associate Professor Phạm Tất Thắng, senior researcher of the Trade Research Institute under the Ministry of Industry and Trade, speaks to Hải Quan (Customs) newspaper about the deficit.

Việt Nam saw a trade deficit of US$84 million in the first two months of this year, according to the General Statistics Office. What is your comment on that?

If we take a look at the general picture of the national economy and its relations with other economies, Việt Nam has mostly seen trade deficits.

The Government has set the target of balancing imports and exports by 2020.

The target was reached in 2017 and 2018. During these two years, Việt Nam obtained a major trade surplus. It was a great achievement of the national economy.

But in fact, the trade surplus was not sustainable and the economy has not stabilised.

The surplus in those years was caused by Foreign Direct Investment (FDI) enterprises.

Foreign direct investment (FDI) enterprises and the agricultural sector enjoy a trade surplus, but domestic businesses continue to record a trade deficit.

Domestic businesses are occupied with restructuring their systems, so they have been less active in importing products.

A trade surplus is good news for the foreign currency reserves and exchange rates. The trade deficit may come back any time. When we look at a short period of time – one month or one quarter – the trade balance is unstable and trade surplus and trade deficit can take turn to come back any time.

It is not unusual to see a trade deficit in the first two months of the year.

In your opinion, what are the direct causes of the trade deficit in the first two months of this year?

Việt Nam’s fully foreign-invested companies and agriculture sector obtained a trade surplus [last year]. In the first two months of the year, exports of the agriculture sector did not have positive results. The beginning of the year is not a favourable time for foreign-invested companies to export products. These are the reasons of trade deficit.

As of February, China is still a major exporter of Viet Nam. Is it a worrisome problem in the long term?

China is the biggest importer to Việt Nam. Exports from China to Việt Nam are predicted to surge in the future. The trade war between the US and China has pushed China to sell more technologies and factories to Việt Nam. The turnover of exports from China will increase. Việt Nam needs to be cautious about that and take advantage of free trade agreements to increase import from the Republic of Korea and European Union to avoid relying too heavily on products from China.

Việt Nam can increase exports and balance trade by bringing its products to China’s massive local market through Chinese distribution systems.

Will Việt Nam be able to ensure a trade surplus like the previous year? What are the optimal solutions to ensure the stability of trade surplus?

It is difficult to make an accurate prediction.

Trade deficits and surpluses can reverse swiftly. The impacts of the US-China trade war on national and global economies are unpredictable.

Việt Nam can achieve its trade balance target and ensure a stable surplus only when domestic enterprises finish their restructuring so that they can balance trade within their companies.

In addition, we need to focus on developing organic and clean agriculture to have sustainable export products. — VNS

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