Ministry of Industry and Trade: 2015 will be a trade deficit again

After many efforts and endeavors of Ministries, branches, localities and especially of Vietnamese enterprises in promoting exports in a very difficult period in terms of market expansion, in the first 10 months of 2014, Vietnam's export turnover is estimated to reach 123.1 billion USD, up 13.4% over the same period and equivalent to an increase of 14.5 billion USD; Import turnover of goods is estimated to reach 121.2 billion USD, up 11.2% over the same period in 2013.

Deputy Minister of Industry and Trade - Do Thang Hai said, at the meeting of the National Assembly Economic Committee, according to the general assessment of members and the scientific council, the increase in import turnover at this time is showing signs of recovery in production and business of enterprises.

With this growth rate, the Ministry of Industry and Trade predicts that in 2014 Vietnam could have a trade surplus of about 1.5 billion USD. Compared to previous years such as 2013 with a trade surplus of 300,000 USD and 2011 with a trade surplus of 749 million USD, this is a record high figure to date.

Many export products of the FDI sector have decreased significantly.

2015 will see trade deficit increase again

Although it is possible to achieve a very impressive trade surplus in 2014, in the process of building import and export targets, especially the trade balance of 2015 to report to the National Assembly for approval, the Ministry of Industry and Trade assessed that in 2015 our country will likely return to a trade deficit of 6 - 8 billion USD.

According to Deputy Minister Do Thang Hai, there are 6 temporary reasons for this. Firstly, in the past, the trade balance with trade surplus mainly came from foreign direct investment (FDI) enterprises, but in the coming time, the trade surplus from this group will grow more slowly.

For example, in 2012, FDI enterprises increased their export turnover by 31%. However, in 2013, the export turnover of this sector only increased by 22% and in the first 10 months of 2014 it was 12%. This is also the export threshold when FDI enterprises have reached a certain capacity, ensuring the proposed profit.

If this downward trend continues, in 2015, the export growth of FDI enterprises will likely be much slower than in previous years, notably for mobile phones - an export product that has decreased significantly so far. Meanwhile, domestic enterprises have been running a trade deficit.

The second reason, according to Deputy Minister Do Thang Hai, is that 2015 will open up many favorable opportunities for export and import development. However, in the early stages of the year, Vietnam's exports are often not able to increase in volume because domestic goods sources have not met both the quantity and quality requirements to penetrate the markets. Moreover, from 2011 to now, the growth rate of export turnover has tended to decrease because the absolute value is at a high level.

In addition, the world economy in 2015 is forecasted to grow better, with prospects of attracting investment from free trade agreements that are about to be signed. In that context, foreign investment resources into Vietnam to seize opportunities from the agreements that are about to be signed will increase. This is the third reason for the increase in trade deficit, because businesses will focus on importing more machinery and equipment.

Deputy Minister Do Thang Hai pointed out the fourth reason: The recent political instability in relations with China has forced Vietnam to expand and diversify its import markets so as not to be too dependent on one market. Having to import from many other countries with better quality goods means higher prices, which will lead to an increase in total import turnover, which will also lead to an increase in trade deficit.

The increase in import value in 2015 is also influenced by the shift of production and business of foreign enterprises from other countries to Vietnam, in view of the prospect of export development after the Free Trade Agreements (FTA) about to be signed with the EU, Korea, Customs Union... or the near future TPP. This will cause domestic and foreign enterprises to increase machinery imports to take advantage of the opportunities of the agreements.

On the other hand, in the coming time, especially from 2015, a number of thermal power plants will come into operation, Vietnam will have to import coal because the domestic coal supply is not enough. Currently, Vietnam has researched many markets that can meet the coal demand of power plants as well as many other fields.

In the oil and gas sector, although Dung Quat Oil Refinery currently meets about 30% of domestic gasoline demand, in the coming time, in addition to reducing crude oil exports for gasoline processing, Vietnam will still have to import crude oil for gasoline processing instead of direct imports.

From the above 6 reasons, the Ministry of Industry and Trade has determined that although in 2015 Vietnam can achieve an export turnover of about 163 billion USD (an increase of 10%) compared to 2014, the import turnover will have to increase more, so the forecast trade deficit will be in the range of 6 - 8 billion USD.

According to VOV