Vietnam Trade Deficit Widens

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By VU TRONG KHANH. May 25th, 2011, from The Wall Street Journal. HANOI—Vietnam’s persistent trade deficit widened to its largest point in 17 months in May, putting further pressure on authorities to address imbalances in the economy.

At $1.7 billion, the deficit was the largest since December 2009, compared with a $1.49 deficit billion in April, the General Statistics Office said Wednesday. Exports in May rose to $7.5 billion from April’s $7.44 billion, while imports rose to $9.2 billion from $8.93 billion, the GSO said.

“I think the measures that the government has taken to cut the trade deficit are not enough,” said economist Pham Chi Lan, a former adviser to the prime minister.

The government said this year that to cut the deficit it would reduce public investment by 10% and cut imports of luxury goods, such as cars, cosmetics and mobile phones.

“Cutting imports of luxury goods won’t bring about a good result, as imports of these products make up only 10%-12% of the country’s total import bill,” Mr. Lan said. “Cutting public investment may result in less imports, but we have to check if any of the public investment projects have really been delayed. Industrial production still keeps rising, showing that not many projects have been cut.”

The May deficit brought the total for the year to $6.59 billion, wider than the $5.46 billion deficit at the same point last year. Exports in the January-May period were up 33% from a year earlier to $34.75 billion, while imports were up 30% to $41.34 billion, the GSO said.

Exports are among Vietnam’s key sources of dollars, and the continuing trade deficit has eroded the country’s foreign-exchange reserves—estimated at $12.2 billion at the end of 2010,down 53% from the peak of $25.8 billion reached February 2008.

A senior official with the Industry and Trade Ministry said last week that Vietnam’s trade deficit would likely shrink starting in June or July as government efforts to cut public investment take effect. The government aims to keep the trade deficit below 18% of total export revenues for the year.

The persistent deficit, together with spiraling inflation, has put pressure on authorities to address economic imbalances. The GSO said Tuesday the consumer price index in May was up 19.78% from a year earlier, the largest year-to-year jump since December 2008—though the month-to-month increase was lower than in April.

“If the trade deficit keeps rising, it will put pressure on the foreign-exchange rate and threaten the government’s goal of rooting out the use of dollars in the economy,” Mr. Lan said.

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