VietNamNet Bridge - The predicted high trade deficit in the first four months of the year reportedly put pressure on the exchange rate and led to the State Bank’s decision to devalue the VND by one percent on May 7.

 

After three days of the dollar price soaring, the market unexpectedly cooled down on the afternoon of May 15. This was attributed to the State Bank’s statement that it was ready to sell dollars to intervene in the market if necessary.

The statement was made at the same time when the General Department of Customs (GDC) released a report on the lower-than-expected trade deficit in the first four months of the year.

The department reported that in April 2015 Vietnam exported more than it imported, with a trade surplus of $900 million. This helped narrow the trade deficit of the country in the first four months of the year to $2.07 billion.

The General Statistics Office (GSO) estimated that the trade deficit would be as high as $3 billion in the first four months of the year, according to Tien Phong. 

The GDC report is good news for the State Bank and businesses, because this helps ease businesses’ anxiety about the lower dollar supply. 

However, this is not good news for policy makers, and the high predicted trade deficit has put unnecessary pressure on exchange rate policy.

Tuoi Tre newspaper quoted Le Thi Minh Thuy, a senior official of GSO, as saying that statistical errors are unavoidable.

Thuy explained that the government and relevant ministries demand statistics in mid-April for the government’s meeting at that time. 

However, GSO could only collect information on events by mid-April, and therefore, it had to make calculations based on the figures it projected for the other half of the month.

Also according to Thuy, there are thousands of import and exports, which make it impossible for GSO to check the import and export turnover of all the products. 

GSO can only make calculations based on 40 categories of products which make up 80 percent of the total import/export turnover.

Tuoi Tre also quoted Nguyen Hoang Hai, deputy chair of the Vietnam Association of Financial Investors (VAFI), as saying that the information about the high trade deficit had influenced the public. 

Meanwhile, the central bank repeatedly said the dollar price increased because of the people’s unreasonable anxiety.

An analyst noted that banks’ and businesses’ expectations on exchange rate have had a high impact on market prices. The dollar supply is still abundant, but banks have sold dollars in dribs and drabs because they expected the dollar price to increase in the future because of the predicted high trade deficit.

Tran Thuy