The trade deficit will be a big challenge for the economy this year due to tax incentives that lower the price of imported goods on the Vietnamese market. (Photo: cafef.vn)Hanoi (VNS/VNA) - The tradedeficit will be a big challenge to the economy this year due to tax incentivesthat lower the price of imported goods on the Vietnamese market.
According to preliminary statistics of the General Department of Customspublished recently, the nation’s export turnover reached 20 billion USD in thefirst month of this year, down 1.3 percent year-on-year, while imports reachednearly 20.8 billion USD, an increase of 3.1 percent.
The trade deficit occurred because, at the same time as export turnover wasdown from the same period last year, demand for imported goods increased inboth quantity and value ahead of the Lunar New Year.
These figures agree with the forecast released a few days ago by the Ministryof Industry and Trade (MoIT), which said the trade surplus will not bemaintained this year due to many visible difficulties. Instead of continuingthe record-breaking trade surplus seen in 2017 and 2018, the country’s exportsmay reverse.
Export turnover in 2019 is expected to reach about 265 billion USD, up by 8-10percent from 2018. The import is about 268 billion USD, up by 11.7 percent.Trade deficit is estimated at 3 billion USD.
In January, the export value of many key products sharply reduced. Exports ofphones and devices were down 27.5 percent to 2.9 billion USD, and electronicsand computers decreased by 5 percent to 2.3 billion USD. Meanwhile, importvalue increased for machines, equipment, parts and tools, which were up 3.8 percentto 3 billion USD.
According to the MoIT’s assessment, import demand this year will increasebecause exports are expected to continue growing in sectors where Vietnam stilldepends on import materials, machines, equipment and spare parts.
This year, the implementation of FTAs and major agreements such as theComprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)and the European Union − Vietnam Free Trade Agreement (EVFTA) will create a newwave of investment in Vietnam by domestic and foreign businesses looking totake advantage of new opportunities. Therefore, imports of machinery andequipment for projects and purchases of materials for production will increase.This will lead to a reversal of the trade balance from a surplus to a deficit.
Minister of Agriculture and Rural Development Nguyen Xuan Cuong said that 2018was a fruitful year for both the industry and agriculture sectors. The year sawa record 245 billion USD in export value in the context of declining exportsworldwide.
Cuong said with the shifting production structure of the economy, the 2018surplus of 7.2 billion USD was a very big number for Vietnam’s economy.However, the forecast for 2019 indicated it will be a very difficult year.
Managing Director of the Vietnam National Garment and Textile Group (Vinatex)Cao Huu Hieu told Tien Phong (Vanguard) Newspaper that the growth of thetextile and garment industry would be unpredictable in 2019.
“With the trade war, if there is a 15 per cent tax increase, the competition onthe market will be very fierce,” Hieu said.
In the face of this situation, Vinatex has to adjust its targets to a growthrate of 8-9 percent.
"The target for export revenue is about 40 billion USD,” Hieu said. “Wealso have to look directly at things that cannot grow forever. We must acceptthere are years without growth. India and Bangladesh having negative growth in2018 are lessons for us. In 2019, Vinatex will not expand investment but isfocused on intensive investment, replacing machines according to periodicplans.”
Speaking about export challenges at a recent conference on implementing the2019 mission, Prime Minister Nguyen Xuan Phuc said that if the MoIT did notinstitute a breakthrough policy for industrialisation and attract more capitalfrom multinational corporations in various fields, Vietnam’s economy would facea lot of difficulties this year.-VNS/VNA
VNA
