Trade deficit expected to return this year: ANZ

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As this is a good deterioration in the current account deficit, foreign investors should not become overly concerned with asset valuations in Vietnam (Photo: Luu Quang Pho) As this is a good deterioration in the current account deficit, foreign investors should not become overly concerned with asset valuations in Vietnam (Photo: Luu Quang Pho)

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After seeing trade surplus over the past three years, Vietnam may face a narrow trade deficit this year, according to a report issued by ANZ Friday.
“A persistent return to trade deficits – dragging the current account into full year deficit – now seems inevitable in Vietnam for 2015 and 2016,” it said.
ANZ forecasts Vietnam will post a current account deficit of 0.5 percent of GDP in 2015 and of 1 percent of GDP in 2016.
Vietnam reported a $3 billion trade deficit in the first four months, compared with a surplus of $2 billion in the same time last year.
However, ANZ assesses the coming deterioration in the Vietnamese trade balance as ‘good’ because the growth of machinery and electronics imports has been driving much of the recent surge in total imports.
Imports by foreign-owned enterprises surpass imports of domestic-owned enterprises, suggesting imports are inputs for export production, it added.
“As this is a good deterioration in the current account deficit, we do not think foreign investors should become overly concerned with asset valuations in Vietnam,” it said.
However, the import of consumption goods, driven by what ANZ believes is a "nascent recovery in domestic demand," is likely to be an element of a "bad deterioration in the current account," the report said.

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