Higher trade deficit to cause shortage of dollars?

VietNamNet Bridge – The high trade deficit of $3.38 billon announced for the first seven months of the year has created concerns that this may cause a dollar shortage, pushing the price of the dollar up.

According to the General Statistics Office, Vietnam’s total export turnover in July reached $4.750 billion, not much higher than $4.737 billion in June. In the first seven months of the year, total export turnover reached $32.347 billion.

 

Meanwhile, total import turnover in July was $6 billion, a slight increase over the $5.902 billion in June. In the first seven months of the year, total import turnover was $35.734 billion. This means that the trade deficit is $3.387 billion for the first seven months of the year.

 

The noteworthy thing is that import turnover is tending to increase: import turnover was $5.456 billion in April, $5.669 billion in May and then $5.902 billion in June and $6 billion in July.

 

The trade deficit also tends to increase as the import turnover increase has nearly caught up with the export turnover increase. Statistics show that in April, the trade gap was just $1.177 billion. The figure rose slightly to $1.5 billion in May. The trade deficit decreased slightly to $1.265 billion in June and $1.250 billion in July. However, the trade deficit of $3.387 billion in the first seven months of the year is really a big volume, equal to 10.5 percent of total export turnover.

 

FDI: nearly 50 percent of capital belongs to expanded projects

 

The capital flowing into Vietnam’s market now seems to be modest, though Minister of Planning and Investment Vo Hong Phuc is optimistic about FDI attraction, saying that the this should be seen as an encouraging result in the context of economic downturn.

 

The Ministry of Planning and Investment has reported the total FDI registered capital of the first seven months of the year at $10.118 billion, equal to 18.8 percent of that of the same period of last year.

 

However, half of the registered capital ($4.689 billion) is the capital of the operational projects expanding operation scale. Meanwhile, registered capital of new projects was just $5.429 billion. In 2008, the capital of newly registered capital always accounted for more than 90 percent of the total attracted capital.

 

Also according to the Ministry of Planning and Investment, 18 percent of FDI capital has been registered to go into the real estate sector. A high percentage of capital, 45 percent, has been registered to go into services and 21 percent to processing industries. The total implemented capital by now has reached $4.6 billion, or 77.5 percent of that of the same period of last year.

 

Besides export and FDI, foreign currency earnings, in principle, can come from portfolio investment and overseas remittance. There is no concrete figure about overseas remittance, but experts believe that the overseas remittance will see a decrease this year due to the weakening global labour market.

 

Dollar continues rising slightly in price

 

The official exchange rate announced by the State Bank of Vietnam for July 28 at 16,969 dong per dollar reflected the increase of 2 dong per dollar in comparison with Monday. This is the highest exchange rate since March 28, but was still lower than the exchange rate recorded on March 24, the first day after the trading band was lifted from three to five percent.

 

Statistics showed that the increase of 5 dong per dollar per week has been maintained for the last many weeks. The recent steady increase has bolstered people’s belief that the dollar will increase in value.

 

Commercial banks on July 28 quoted the dollar price at 17,817 dong per dollar, an increase of 2 dong over Monday. The exchange rate on the black market on the same day was 18,460 dong per dollar (purchase) and 18,490 dong per dollar (sale).

 

VietNamNet/DTCK