Falling crude-oil prices to lead to fewer imports from China: economists
Falling crude-oil prices to lead to fewer imports from China: economists
The continued oil price falls will do more good than harm to Vietnam and will lead to a reduction in imports from China, Dr. Luong Van Khoi from the Vietnam National Center for Socio-Economic Forecasting has said.
He described three economic development scenarios for Vietnam with an emphasis on oil price performances on the national economy.
Khoi said if the oil price hovers around $50 per barrel, this would help Vietnam’s GDP increase by 0.48 percent. However, the state budget revenue would decrease by VND6.6 trillion, while the foreign exchange reserves would decrease by $1 billion and the inflation rate would increase by 0.23 percent.
With the second scenario, if the oil price falls to $40 per barrel, the state budget revenue from tax collections would decrease by another VND1 trillion, but the GDP would increase by another 0.13 percent.
In case the oil price plunges to below $30 per barrel, the state budget revenue would decrease by VND8.7 trillion, but GDP would increase by another 0.75 percent.
If the lending interest rate decreases by one percent and the Ministry of Finance raises the VAT rate by one percent, this would help improve the GDP and earn more money for the State budget to offset the loss caused by the oil price fall.
The research team has estimated that the state budget revenue would increase by VND3.1 trillion if the oil price is at $50 per barrel, while the figures would be VND4.1 trillion and VND5.23 trillion, if the oil prices stay at $40 and $30 per barrel, respectively.
In all cases, the oil price falls would bring more positive than negative impact. The price decreases would help businesses reduce production costs, make higher profits and pay higher taxes to the state.
This would help Vietnam boost exports to large markets like the US and Japan, especially when the global economy improves.
Khoi went on to say that the oil price decrease would have a big impact on Vietnam-China economic relations.
“This would help reduce imports from China, Vietnam’s biggest trade partner and the economy with which Vietnam sees the biggest trade deficit,” Khoi said.
If the oil price falls to below $50 per barrel, the Vietnam-China export/import turnover would decrease by 50 percent, while import turnover falls from China would be offset by an increase in import turnover from other countries.
In case the oil price is under $40 per barrel, two-way trade turnover would drop by 30 percent, and if the oil price is below $30 per barrel, Vietnam would stop importing materials and half-finished products from China, while its businesses would consider importing products from other sources.
