Vietnam trade deficit widens in July as exports slip

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Vietnam's trade deficit widened in July from the previous month on falling exports as the country lags behind Asian counterparts leading the global recovery.

The trade shortfall widened to $1.15 billion from a revised $742 million in June, according to preliminary figures released Tuesday by the General Statistics Office in Hanoi. For the seven months through July, the deficit was $7.4 billion, almost twice the figure for the same period last year.

Vietnam's monthly trade deficit has been unable to stay below the $1 billion level sustainably, in part due to the failure of exports to move up the value chain, wrote Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc, in a note this month.

"The export rebound in Vietnam is lagging behind that of other East Asian export-oriented economies," said Thomas Byrne, a Singapore-based senior vice president at Moody's Investors Service, citing Indonesia as an example.

Exports fell 8.2 percent in July to $5.8 billion from a revised $6.32 billion in June, according to Tuesday's figures. For the year, exports have increased 17.5 percent to $38.27 billion.

Footwear shipments slipped 2.7 percent in July to $470 million from $483 million in June, while exports of electronic equipment dropped 9.4 percent to $280 million.

"Small- to medium-sized enterprises in Vietnam are having real problems getting loans," said Alan Pham, the Ho Chi Minh City-based chief economist at VinaCapital Investment Management Ltd.

Getting credit

"In the footwear sector, those companies that were able to get credit have had difficulty moving their merchandise, given the problems in the European market, while others simply couldn't get credit at all," Pham said, in a telephone interview Tuesday.

Vietnam's government urged banks to cut interest rates to boost economic growth after first-quarter credit expanded by 3.3 percent, compared with the central bank's full-year target of 25 percent. By mid-June, the figure increased to 10.5 percent, and VinaCapital said this month that credit growth will probably meet the target by the end of 2010.

The Vietnamese economy expanded 6.4 percent in the second quarter, compared with 5.8 percent in the first quarter, as the country's government urges banks to cut lending costs to support growth.

Vietnam's economy faces persistent balance of payments risks, Nomura Holdings Inc. said last week, citing concern that a wider trade deficit may hurt the Vietnamese dong.

"The trade gap is within a sustainable range, as capital inflows can adequately cover the trade shortfall," VinaCapital said in a research note. Still, concern over a government estimate that the trade deficit for the full year may reach $14 billion has hurt confidence in the dong, VinaCapital said.

The Vietnamese currency has fallen 3.1 percent this year, according to Bloomberg data. The country's reserves fell to $15.2 billion at the end of 2009 from $23 billion in 2008, according to the World Bank.

Imports fell 1.5 percent in July to $6.95 billion from a revised $7.06 billion in June, the General Statistics Office said. For the year, imports rose 25.5 percent to $45.71 billion.

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