Vietnam's trade deficit widens as exports fall on gold sales

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Vietnam's trade deficit widened in June as exports slumped due to a decline in gold sales.

The shortfall widened to US$1.2 billion from a revised $871 million in May, based on preliminary figures from the General Statistics Office in Hanoi. Exports slipped 5 percent in June to $6 billion and imports were little changed at $7.2 billion.

Vietnam's export figures were boosted in May by the sale of previously imported gold as traders took advantage of a gap between domestic and international prices. Almost all Vietnamese gold exports are from bullion obtained through past imports rather than local output.

"The trade data for May were distorted by a jump in exports of precious metals," said Ben Bingham, the senior resident representative in Vietnam for the International Monetary Fund. "If you strip out the gold figures, it looks like underlying exports continued to make a steady recovery."

Exports of precious metals in June fell to $350 million from a revised $993 million in May.

"The gold exports here are not really a true commodity export, but more of a portfolio relocation that really distort the figures," said Martin Rama, lead Vietnam economist for the World Bank.

Overall deficit

The deficit widened to $6.73 billion in the first half from $2.26 billion in the same period a year earlier, based on today's figures.

"Vietnam needs to see improved exports to mute any incipient concerns about its balance of payments," said Matt Robinson, a Sydney-based economist for Moody's Analytics Inc.

The weaker Vietnamese dong, which traded today at 18,975 per dollar, compared with 18,479 at the end of 2009, may not help ease the country's trade deficit as much as a weaker currency would elsewhere, the World Bank's Rama said.

"Because of the strong import-based component of many Vietnamese exports, the weaker currency doesn't make such a big difference to the overall trade balance," said Rama. "If the currency weakens, companies get more for their exports but they have to pay more for their imports."

A widening deficit poses a "macroeconomic risk," the country's central bank told a meeting this month in the Mekong Delta province of Kien Giang. The government's policy is to "combine measures to promote exports and control imports," the central bank said.

Vietnam shouldn't "import unnecessary items and should use tax measures, tariffs, and technical barriers to limit imports and promote production and consumption of domestic goods, thus contributing to reduce the deficit of the international balance of payments," the State Bank of Vietnam said in its report to the meeting.

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