The pumping of more crude oil will put Vietnam at a significant disadvantage, according to a preliminary report of the World Economic Board at the Ministry of Planning and Investment’s National Center for Socio-Economic Information and Forecast.

A drilling platform is seen off Vietnam’s southern coast. The pumping of more crude oil will put Vietnam at a significant disadvantage, according to a report

The report says the world oil price might pick up slightly this month. The average price of West Texas Intermediate (WTI) crude oil, the U.S. standard, climbed to US$47.12 per barrel on July 19 from US$45.18 in June, helped by a sharp fall in U.S. crude inventories.

But oil will come under downward pressure as the global oil price has dipped 12% so far this month compared to early this year, according to the report.

The report notes the Government should pay careful attention to its decision to extract an additional one million tons of crude oil in the rest of the year since the breakeven point has hovered around US$50 per barrel.

“With oil below US$50 a barrel, the Government should give a second thought to its oil pumping hike plan which is aimed at helping achieve the 2017 GDP growth target (6.7%),” says the report.

The U.S. Energy Information Administration said in its latest Short-Term Energy Outlook that the WTI price is forecast at US$48.95 per barrel and the Brent price, the international benchmark, at US$50.79, below previous forecasts.

Unfavorable exports

The report indicates America and Australia have adopted more trade defense instruments against some of Vietnam’s export products.

The U.S. has launched a global safeguard against foreign washing machines, including those made in Vietnam by Samsung and LG. If their products are subject to special tariffs or quotas in the U.S., the two South Korean firms would suffer.

Having suspended anti-dumping investigations into polyester fiber imports from Vietnam, the U.S. announced all imports of Siluriformes fish (tra fish) from Vietnam will be inspected under a mandatory inspection program starting from August 2. This will hit Vietnam’s upcoming exports.

U.S. President Donald Trump said in a tweet on July 3 that he would consider tariffs of up to 20% on foreign steel and aluminum. Meanwhile, the Australian government has applied more stringent import conditions on shrimp and shrimp products, including those from Vietnam, since July 7.

These trade protectionist measures are forecast to make life difficult for Vietnamese exporters of steel and shrimp. As such, the country’s export target may be hard to obtain in the rest of the year.

Notably, Vietnam’s trade deficit with South Korea soared to a record high of US$15.9 billion in the first half of this year, as the Vietnamese economy is increasingly dependent on Korean conglomerates like Samsung and LG.

The report suggests Vietnam should invest heavily in supporting industries to reduce imports of machinery and equipment, and step up exports to South Korea by improving quality, diversifying products, and meeting requirements for food hygiene and safety in a bid to narrow the trade deficit.

SGT