Vietnam Trade Figures Show Improving Trend, HSBC, Moody's Say (Bloomberg)

Vietnam Trade Figures Show Improving Trend, HSBC, Moody's Say

By Jason Folkmanis

July 25 (Bloomberg) -- Vietnam's trade deficit, which has caused concerns this year about the stability of the nation's currency, is easing as import growth slows and exports accelerate, HSBC Holdings Plc and Moody's Economy.com said.

The trade gap in the seven months through July reached $15 billion, up 2.4 times from a $6.3 billion shortfall in the year earlier, according to preliminary figures released yesterday by the General Statistics Office in Hanoi. The pace of widening was down from 2.7 times through June and from having more than tripled through May.

The figures show a ``clearly improving trend,'' HSBC said, citing monthly deficits that have narrowed from as much as $3 billion earlier in 2008 to less than $1 billion. The ``encouraging'' numbers should help revive investor confidence and support stocks in the country as well as the Vietnamese dong, Moody's Economy.com said.

``Import growth continues to moderate,'' wrote Sherman Chan, a Sydney-based economist at Moody's Economy.com, a unit of New York-based Moody's Corp. ``Continued improvement in the trade imbalance will make investors slowly forget fears of current account and currency crises.''

Imports rose 57 percent in the seven months through July, down from a revised 62 percent growth rate in the first half, according to the government figures. The slower pace of import expansion reflects partly a slowing economy and partly a reversal of previous hoarding, wrote Robert Prior-Wandesforde, an economist at HSBC, in a note to clients.

Concerns Ease

``Above all I suspect it was the expectation of future price rises that led to the hoarding, as well as fears among importers that they wouldn't be able to get hold of the dollars necessary to make purchases,'' Prior-Wandesforde said in e-mailed responses to questions from Bloomberg News. ``Both of those concerns have probably eased somewhat now.''

While Vietnam's year-on-year inflation rate accelerated to 27 percent in July, prices on a monthly basis rose at the slowest pace since October 2007, according to the HSBC note.

``Despite the fact that the data are not seasonally adjusted, the market often also pays attention to the month-on-month change and will no doubt take comfort from the fact that it rose `just' 1.1 percent,'' Prior-Wandesforde said. ``Things are clearly moving in the right direction as far as the trade situation is concerned and should do fairly soon in the case of inflation.''

While a tightening of monetary policy and state spending were positive policy decisions, recent moves by Vietnamese commercial banks to cut lending rates pose a risk to the economic outlook, said Chan of Moody's Economy.com.

The moves ``are counter to what the central bank would have liked,'' Chan wrote. ``Lower borrowing costs will stimulate domestic demand, potentially causing a reacceleration in imports, which has been a prime factor in the widespread concerns about a crisis earlier in the year.''

To contact the reporter on this story: Jason Folkmanis in Berkeley, California at folkmanis@bloomberg.net.

Last Updated: July 24, 2008 13:01 EDT    

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