Vietnam's rising trade deficit has economists worried about the exchange rate and macro-economic management.
Economists worried about rising trade deficit
The Ministry of Industry and Trade estimated the trade deficit in 2015 will be in the range of VUSD6-8bn. Recent reports put the trade deficit in the first five months at USD3bn, USD1bn for May alone.
An expected surge in the deficit in the middle of the year will make the coming months a tough challenge.
"Trade deficit will badly affect the macro-economy," said economist Pham Chi Lan, former deputy head of Vietnam Chamber of Commerce and Industry. "FDI companies are contributing to the current increasing deficit."
Nguyen Dinh Cung, director of the Central Institute for Economic Management, said the trade deficit "is putting pressure on the state budget and exchange rate management, especially with China."
Nguyen Duc Thanh, director of Vietnam Centre for Economic and Policy Research, said the trade deficit is fuelled by falling oil export prices, and that other export industries, including textile and mobile phone parts, have reached their limits in capacity and scale.
"In the past three years, we had a trade surplus of USD1-3bn. This means the economy recovered, but this recovery is not stable," Cung said.
Some economics argue that the deficit may be a good sign, that companies are importing more materials for production because their businesses have recovered.
A trade deficit is considered inevitable since Vietnam is joining various trade pacts that will further open its markets to imports as well opening more export markets, posing challenges for both policy makers and local companies.
Lan urged companies to quickly improve capacity and competitiveness in the current global integration process.
