Vietnam trade deficit raises alarm over GNP
Vietnam trade deficit raises alarm over GNP
Vietnam’s trade deficit continued to broaden in the eight months leading up to September, adding to growing concerns over weakening domestic demand for home-grown goods and services.
Though exports rose 9% to US$106.3 billion from a year earlier, imports jumped 16.4% to US$109.9 billion, pushing the trade deficit up to US$3.6 billion, according to the latest statistics released by the General Statistics Office (GSO).
Vietnam’s economy for the eight months January-August was sapped mainly by weaker than expected consumer spending for local goods and services, though domestic exports also were also a drag.
"The trade deficit enlarged for the period and should continue to rise in coming months,” said the GSO, making it harder for the nation to keep it in check and in the range of US$6-8 billion for the year.
The GSO said the deficit is bringing to centre stage the problems with the low gross national product (GNP), which is a measure of the market value of all goods and services produced in Vietnam by domestic businesses.
The gross domestic product (GDP) on the other hand measures the total value of all goods and services produced within Vietnam’s borders by both domestic and foreign invested companies.
The GNP actually generated a US$13 billion trade deficit for the eight month period, which was offset by a surplus from foreign invested companies of US$9.4 billion, which nets to the overall US$3.6 billion deficiency.
China remained the largest supplier for the country with imports spiking 20.4% year-on-year to US$32.7 billion, accentuated by a weakening of Chinese imports due to a slack in demand.
China's recent move to devalue the yuan, making its own products more price competitive in overseas markets, has further deepened unease over the trade outlook.
The GSO also forecast that lower sales prices and demand for oil in the remaining months of the year would most likely negatively impact the nations’ exports of oil and gas and thereby fuel the deficit.
One bright spot is that the US remained the largest importer of Vietnamese products with exports surging 19.8% year-on-year to US$22.1 billion.
Shrinking the trade deficit
For domestic manufacturers, one way to shrink the deficit is to persuade the nation’s consumers to purchase more home produced Made-in-Vietnam goods by becoming more competitive, said the GSO.
This means they must learn more about consumer’s wants and needs and do a better job marketing to those desires whether that be functional or emotional to deliver a better deal to the consumer.
Manufacturers need to raise the skill levels to create more flexible and productive workforces that can utilize innovative technologies and enable them to move into new areas of work.
They need to support science and innovation to promote the development of new technologies and more efficient ways of working. Most importantly, they need to create an economy that depends on its ability to create innovative goods and services.
Developing a better industrial strategy and identifying those particular industries that will contribute to long term economic growth also goes to the heart of shrinking the deficit.
They should follow the lead of foreign invested manufacturers who currently are successfully importing components and raw inputs, adding value and exporting the finished product at a profit.
Domestic manufacturers focus too much on commodity and processing industries, which are subject to wild fluctuations in the global market, add little value and concentrate too much on price competition, with insufficient emphasis on quality.
It isn’t just about manufacturing but in short— the trade gap is all about lower level of skills, investment, research and development, and innovation by domestic businesses relative to their foreign counterparts, said the GSO.
