Vietnam reports trade-balance surplus for first time since 2006

Oil tanks at the Dung Quat Oil Refinery, Vietnam’s first such facility, in the central province of Quang Ngai. The country imported 26.2 percent fewer oil products by volume but the value fell 60 percent to $753 million during the first two months. Vietnam has reported its first year-to-date trade surplus since 2006, as companies slash overseas purchases of equipment and raw materials amid tumbling demand.

The surplus for the first two months of the year totaled US$290 million, compared with a deficit of $5.13 billion in the same period a year earlier, the General Statistics Office (GSO) said Wednesday in Hanoi. Exports fell 5.1 percent to $8.02 billion, while imports plunged 43.1 percent to $7.73 billion, according to the preliminary figures. The GSO also revised the trade surplus for January to $390 million, up from an initial estimate of $300 million. “Due to the impact of the world economic turmoil on the Vietnamese economy, the country was forced to strongly reduce its imports. It is the first [monthly] trade surplus we’ve had since 2006,” AFP quoted a GSO official as saying. Vietnam has not posted a full-year trade surplus since 1992. The economy last year suffered from a widening trade deficit and double-digit inflation but both have been brought back under control. Now, however, the government faces the challenge of protecting the economy from the worst of the global recession, and the authorities have taken aggressive monetary easing steps while drawing up a modest fiscal stimulus package. Still, the trade data suggested the economy was feeling the effects of the downturn. This year’s reversal may indicate a sharp slowdown in Vietnamese economic activity. “A positive trade balance in Vietnam would worry me a bit, because it would suggest that economic growth isn’t there,” said Alain Cany, chairman of the European Chamber of Commerce in Vietnam. “Vietnam needs to import in order to grow. It is not self-sufficient.” Economic growth slowed to 6.2 percent last year from 8.5 percent in 2007. The government hopes to keep it at 6-6.5 percent this year, though the International Monetary Fund and others forecast growth to be closer to 5 percent. Prime Minister Nguyen Tan Dung earlier this month said he expected the slowdown to end by May. The improvement in Vietnam’s trade balance “is largely a reflection of weaker domestic demand, which is cutting into imports,” said James McCormack, head of Asia sovereign ratings at Fitch Ratings in Hong Kong. “It’s been surprising to see just how weak the import numbers have been in Asia.” In the first two months of 2009, Vietnam spent $412 million on steel, down by 74.2 percent and $169 million on fertilizers, down 33.7 percent. Machinery and equipment imports fell 24 percent to $1.77 billion, while petroleum-product imports fell 26.2 percent by volume and 60 percent by value to $753 million. The country on Sunday opened its first crude oil refinery in the central province of Quang Ngai, which operator Vietnam Oil & Gas Group, known as PetroVietnam, says may meet about one-third of the country’s fuel demand next year. Imports of inputs used in garment production slumped, with purchases of cloth slipping 4 percent to $494 million. “Orders are down for light export industries,” said Cany of the European Business Chamber in Vietnam. “Probably some companies were surprised by the extent orders fell and they were overstocked, which significantly reduced their import demand.” Mixed export results Exports were buoyed by an estimated rise of more than 3,000 percent in sales of precious metals and gemstones to $939 million. Garment and textile exports were up by 0.7 percent to $1.27 billion. Rice exports were estimated to have more than doubled at $399 million. The US Foreign Agricultural Service this month cut its forecast for rice exports this year by Thailand, the world’s biggest shipper of the grain, citing “increased competition” from Vietnam. Rubber exports, however, slipped 50 percent to $101 million in the first two months of the year. Coffee exports slipped 10 percent by value to $440 million. Vietnamese coffee farmers have been withholding sales to the market since the end of the country’s Tet (Lunar New Year) holiday in late January, according to a February 23 note from Hong Kong-based SW Commodities. “Exports from Vietnam depend largely on the prices of key commodities,” said Adam McCarty, chief economist at Mekong Economics Ltd. in Hanoi. Crude oil shipments fell 42 percent by value to $958 million, as global prices of the commodity have been an average of 57 percent lower so far this year than during the same period a year earlier. By volume, crude oil shipments rose 27 percent. Crude oil is Vietnam’s biggest foreign exchange earner. “Vietnam’s oil output should increase to about 16 million tons this year,” said PetroVietnam Chairman Dinh La Thang, in a February 21 interview in the town of Quang Ngai. The state-owned company said at the end of December that it produced about 15 million tons of crude oil and condensate in 2008. Vietnamese crude oil production may reach 20 million tons annually by 2012 and the country hopes to be able to sustain that level of output for as many as seven years, Thang said. Although crude oil output is expected to rise, the government said December 31 that crude exports may decline 13.7 percent this year because of the operation of Dung Quat oil refinery. FDI down Vietnam drew more than $5.3 billion from foreign investors in the first two months of the year, or 70 percent of the same period last year, the Ministry of Planning and Investment’s Foreign Investment Agency said in a report Wednesday. The country granted licenses for 67 new projects with total registered capital of more than $1.5 billion in January and February. Investors of 10 existing projects were allowed to increase their capital by a total of more than $3.8 billion, according to the statement. Vietnam expects to receive $12 billion of pledged foreign investment in 2009, Phan Huu Thang, director of the ministry’s foreign investment department, said on Vietnam Television’s InfoTV early this month. The country last November said the overseas disbursement level, which represents actual cash received from promised foreign investment, may drop to as low as $10 billion in 2009 amid the global financial crisis. Source: TN, Agencies (With additional reporting by Ngan Anh)