Vietnam exports up,but inventories loom
HANOI -
Vietnam released economic data on
Friday that showed an improving
trade performance in the first half of
the year, but which also raised the
spectre of rising inventories.
The General Statistics Department
estimated the January-June trade
deficit would narrow to $232 million
from almost $1.3 billion in the year
earlier period thanks to healthier
exports and plunging imports.
Exports were estimated to rise 7.7
percent to $4.995 billion while
imports would fall 12 percent to
$5.227 billion.
But economists said sustained
industrial growth -- the statistics
office estimated the year-on-year
rate in June at 10.3 percent --
indicated factories were still pumping
out goods despite an economic
slowdown.
Economists expect Vietnam to grow
around three percent this year from
an official figure of 5.8 percent in
1998.
Official growth estimates for the first
half have not been released, nor have
details on countrywide inventory
levels.
``The figures show production is
rolling on but is anybody buying this
stuff? When the situation gets to full
inventories (Vietnam may) see a
large drop in total output,'' said Ari
Kokko, a Vietnam expert at the
Stockholm School of Economics.
He said this would put heavy
pressure on jobs.
``Layoffs would not be surprising,
although this is not really the
Vietnamese way of handling things,
so maybe it would be more
underemployment,'' he told Reuters.
Separate data released on
Wednesday estimated year-on-year
inflation in June at 4.4 percent from
8.7 percent in June 1998, proof that
consumer demand was sliding,
economists said.
Kokko said the threat of deflation
was real.
``I see that definitely if we have a lot
of stockpiling. To clear inventories,
companies will cut prices and that
process would have a serious impact
not only on prices but on the
willingness of companies to
produce,'' he said.
On the trade front, the narrowing
deficit has taken heat off the balance
of payments, which has suffered
amid a steep drop in inflows of
foreign investment in the past two
years.
But the trade deficit has narrowed
partly because of official curbs on
imports to conserve foreign
exchange, a practice that has not
won Hanoi any friends at multilateral
agencies and major trading nations.
Meanwhile, exports have stuttered all
year, with shipments falling in the first
few months of the year before
growth scrambled back into positive
territory.
For Vietnam to hit double-digit
export growth -- rates of 20-30
percent were common in the
mid-1990s -- a more realistic
exchange rate and lower costs were
needed to help companies compete
against leaner regional rivals,
economists have said.
Bankers have said the local dong
currency was overvalued by 15-20
percent.
Key export gainers in the first half
compared with the same period in
1998 were textiles and garments, up
12.1 percent at $697 million, aquatic
products up 9.9 percent at $399
million and pepper shipments, up
160 percent at $91 million.
Reuters - June 25 , 1999.
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