Vietnam obtained a record trade surplus during the past eight months of the year despite the impact of the COVID-19 pandemic, but many experts do not interpret it as a good sign of the economy.

The General Department of Vietnam Customs reports Vietnam earned US$175.36 billion from exports while it spent US$161.9 billion on imports over eight months. As a result, it enjoyed a record trade surplus of US$13.5 billion, representing a 2.5-fold increase compared to the same period last year.

The eight-month figure even beat the US$9.9 billion trade surplus Vietnam secured last year.
Worthy of note is that the positive trade surplus was achieved when the national economy was negatively affected by the COVID-19 pandemic.

Many experts say they are worried rather than happy because the record high trade surplus does not reflect the true nature of the national economy.
According to Dr. Le Quoc Phuong, former Deputy Director of the Center for Industry and Trade Information under the Ministry of Industry and Trade, Vietnam's economy has always been in surplus in recent years which can help the country increase foreign exchange reserves.

However, he expresses his concerns about the disproportionate development of the economy as there was a steep drop in imports compared to exports over the past eight months, leading to a record trade surplus.

“Materials for production make up 90% of Vietnam’s imports and a steep fall in imports will definitely affect production in the future. It is really a worrying sign,” says Dr Phuong. “In addition, Vietnam’s trade surplus relies greatly on FDI business sector, while the domestic business sector runs a huge trade deficit.”

Echoing Dr Phuong’s view, Pham Tat Thang, a trade expert, says the sharp decline in imports means Vietnam has experienced difficulty in importing materials for production.

“This year, Vietnam could not import materials due to two reasons. Firstly, there are not as many export orders as in previous years. Secondly, when businesses secure an export order, the supply chain of raw materials is disrupted,” Thang analyses.

Thang further elaborates that most businesses have mainly used raw materials in stock for export orders so far this year, while sources of material imports for the coming months are still unknown.

“This is why out exports exceeded imports over the past eight months,” he says.

Looking at the country’s trade exchanges over eight months, economist Tran Toan Thang analyses that both exports and imports fell by different rates compared to the same period last year. This means the record trade surplus that Vietnam enjoyed was largely attributable to a rapid decrease in imports rather than a sharp increase in exports.

“On the one hand, a big trade surplus helps the State get an additional amount of foreign currency to stabilize the forex market. But on the other hand, the move could negatively affect the country’s economic recovery efforts,” says the economist.

The Ministry of Industry and Trade forecasts Vietnam's trade exchanges will likely prosper in the second half of 2020, after many countries began to relax disease control measures and accelerate the recovery process.

In addition, the implementation of the EU-Vietnam Free Trade Agreement (EVFTA), starting from August 1, 2020, will offer a wealth of opportunities for exports in the remaining months of the year.

When the disease is brought under control in Europe, plus the enforcement of the EVFTA, Vietnamese businesses will much benefit from tariff cuts when exporting goods to this demanding market.

Source: VOV