Vietnam first-half trade deficit $6.65 bn

HANOI — Vietnam's trade deficit reached $6.65 billion for the first half, official estimates showed Monday, below the government's target but pointing to continuing problems in the economy, analysts said.

Imports in the first six months reached an estimated $48.98 billion, up 25.8 percent year-on-year, while the value of exports is expected to reach $42.33 billion, an increase of 30.3 percent, the General Statistics Office said.

The first-half deficit compares with $6.73 billion in the first six months of 2010.

Vietnam in February devalued its dong currency by 9.3 percent in a bid to narrow the trade gap, and imposed a series of other targets in an effort to stabilise an economy confronted with a complicated mix of challenges including inflation that is among the world's highest.

Consumer prices rose almost 21 percent year-on-year in June, estimates showed.

Giang Thanh Long, a vice dean at the National Economics University in Hanoi, said Vietnam faces a structural problem because exports remain low-value added goods such as garments, while imports consist of finished goods, machinery and equipment used as production inputs.

"That is a big issue for Vietnam," he said.

"The dependence on import inputs may be not good for the economy," said Tran Tri Dung, of DHVP Research and Consultancy.

The communist government says it wants to move towards a more high-tech production system.

It is targeting a trade deficit below 16 percent of the export value, meaning the first-half figures are slightly under the target.

Early this month official media reported that the central bank ordered state-owned firms to sell US dollars to commercial banks in another effort to control the trade deficit and stabilise the currency.

The International Monetary Fund said in early June that Vietnam's foreign exchange reserves had risen to $13.5 billion in May.

But economists say the ideal range should be about $20 billion to $25 billion, or enough to pay for 2.5 months of prospective imports.

Vietnam's efforts to reduce the trade imbalance "are likely to meet with difficulties due to persisting high import demand for raw materials and rising prices on the global market," the official Vietnam News Agency said.