In the first six months of 2021, Vietnam had a trade deficit of US$1.47 billion, raising concerns that if the situation is not controlled, it may have negative impacts on the economy. However, considering all factors, it is forecast that Vietnam will see a trade surplus of US$2 billion for the whole year.

Textiles and garments, leather and footwear are forecasted to have many
opportunities for export in the second half of the year. Photo: N.Thanh

Fear of increase in imported consumer goods

After many years of consecutive trade surplus, Vietnam recorded a trade deficit in the first months of 2021.

Mr. Nguyen Viet Phong, Director of the D Trade and Service Statistics Department; (General Statistics Office, Ministry of Planning and Investment), said Vietnam had a trade deficit of US$460 million in February, 2021; US$1.2 billion in April 2021; US$2.1billion in May and US$1 billion in June.

In general, in the first six months of 2021, Vietnam had a trade deficit of US$1.47 billion. Of which, the domestic economic sector saw a trade deficit of US$15.01 billion; FDI sector saw a trade surplus of US$13.54 billion.

In first six months of 2021, export turnover is estimated at US$157.63 billion, up 28.4% year-on-year; import turnover was estimated at US$159.1 billion, up 36.1% year-on-year. The trade balance of goods saw a trade deficit of US$1.47 billion.

Regarding the structure of imported goods in the first half of the year, the group of production materials was estimated at US$149.32 billion, up 36.7%year-on-year. Of which, the group of machinery, equipment, tools and spare parts reached US$72 billion, up 33%; group of raw materials, fuel and materials reached US$77.35 billion, up 40.2%; and the group of consumer goods was estimated at US$9.78 billion, up 28% year-on-year.

Mr. Phong is afraid that “In the first half of the year, Vietnam spent US$1.8 billion to import CBU cars, the increase in import of consumer goods will reduce the competitiveness of domestic goods. At the same time, import prices of goods for production were also higher than those in the same period last year. Specifically, import price of computers, electronic products and components rose by 1.62%; machinery, equipment, tools and spare parts rose by 0.56%; fabric rose by 1.65%; iron and steel rose by 7.65%. If the trade deficit is not controlled, especially the trade deficit of consumer goods, it will cause negative impacts on the economy such as wasting foreign currency or affecting domestic production,” said Phong.

Speaking to a reporter of Customs News about the return of the trade deficit in the first half of this year, Dr. Le Quoc Phuong, former deputy director of the Industry and Trade Information Center (Ministry of Industry and Trade), said Vietnam's trade deficit is still low.

So far, Vietnam is a developing country, so the demand for imports is very large. Vietnam's economy is still mainly processing and assembling, so it has to import many spare parts and materials. Therefore, imports higher than exports are not a big problem. “Notably, when looking at the structure of imported goods, we can see that Vietnam mainly imports production materials. Imports of consumer goods also increased but accounted for a relatively small proportion of total import turnover in general," said Le Quoc Phuong.

Vietnam forecast to see a trade surplus of US$2 billion

According to the latest analysis of the Ministry of Industry and Trade, Vietnam's imports and exports will still have some primary favorable factors, especially for ten-billion-dollar export commodities.

For example, countries are vigorously implementing vaccination along with the easing of social distancing measures, leading to increased demand for Vietnam's textile, footwear, and wooden products. Along with that, some economies continue to deploy stimulus packages through direct support to people, thereby promoting consumption, including goods imported from Vietnam.

However, Vietnam's exports also face many difficulties when protectionism is returning. Specifically, the number of trade remedy cases against Vietnam's export goods has tended to increase.

Mr. Le Quoc Phuong also mentioned the sharp increase in international freight by sea from the fourth quarter of 2020 until now. Specifically, freight of Asian routes rose 3-4 times, African routes rose 3-4 times, European routes rose 5-6 times, even 7-8 times. Meanwhile, the shortage of containers is still a problem.

In case the factors are at the current level or more favorable, the total export turnover of this year is forecasted by the Ministry of Industry and Trade to reach about US$308 billion, up 9% compared to 2020.

Regarding imports, based on the progress in the first months of the year, the import turnover is likely to reach about US$306 billion, up 16.5% compared to 2020. The trade surplus will be about US$2 billion.

Regarding how to promote Vietnam's export of goods in more a sustainable manner, Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of Industry and Trade), said the most important thing is that exports must be associated with macro-economic stability and maintain a stable trade balance.

The Ministry of Industry and Trade has worked with ministries and agencies to plan production and export in the direction of reducing low-value-added products and focusing on high-value-added products; reviewing legal documents, removing difficulties and creating maximum facilitation for commercial activities.

Along with export development, it is said that Vietnam must also control imports well through issues such as rules of origin, combating evasive measures and developing supporting industries to replace imported goods.

“In conclusion, on such foundations, the Ministry of Industry and Trade is developing the Merchandise Import-Export Strategy for the 2021-2030 period, which will be submitted to the Government for consideration and promulgation in the near future. The views and orientations on sustainable export will be clearly expressed in this document," said Mr. Tran Thanh Hai.