Trade Gap May Endanger Vietnam Growth, Moody Says
Vietnam’s trade deficit will probably need to be narrowed to ensure its sustainable growth, Moody’s Economy.com said.
The country’s trade gap widened to US$1.9 billion in Oct, extending seven straight month trade deficit, Alaistair Chan, a Sydney-based economist for Moody’s Economy.com said on November 4.
Vietnam’s economy expanded 5.8% in the third quarter and the government is targeting a 6.5% expansion next year.
The trade gap is hurting confidence in Vietnam’s economy, and Australia & New Zealand Banking Group Ltd said earlier last week interest rates will rise and the currency will depreciate.
The weaker dong will limit the recovery in import demand, imports fell 22% in the 10 months through October from a year earlier, it said.
Twelve-month non-deliverable forwards put the dong exchange rate down 13% against the dollar a year from now, according to Moody’s Economy.com.
Weaker dong helps Vietnam’s export competitiveness, but “a robust recovery in Vietnam’s exports will require a revival of demand in the US and Europe.” Chan said. (Moody’s Economy.Com, Bloomberg)
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