Vietnamese Trade Deficit Narrows Through July; Inflation Eases

By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”By Jason Folkmanis

July 24 (Bloomberg) -- Vietnam’s trade deficit narrowed, providing potential support for a currency hurt by concerns that stockpiling of dollars is making it difficult to pay for imports.

The trade gap shrank 78 percent in the seven months through July to $3.4 billion from $15.2 billion in the same period a year earlier, the General Statistics Office said in Hanoi today. Inflation eased this month to a five-year low of 3.3 percent.

Any re-widening of the trade deficit as the economy gathers steam would be a concern for the exchange rate of the dong, which is currently “fragile but stabile,” according to HSBC Holdings Plc. The prospect of a wider gap may be quickening the depreciation of the currency, Dragon Capital said this month.

“Figures like this shouldn’t serve as a catalyst to trigger a run on the currency,” said Matt Robinson, an economist at Moody’s Economy.com in Sydney. “We’re not at that threshold point. But the underlying issue and the specter of a run is a clear and present danger that Vietnam faces.”

The dong declined to a record low of 17,862 against the U.S. currency this week, using the so-called official rate. Steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, according to the Vietnam Steel Association.

“You have to pay more than the official rate to get dollars,” said Alan Young, chief operating officer of Vietnam Industrial Investments Ltd., citing a figure of about 18,300 dong per dollar. “When we know we’ve got a shipment coming in we’ve got to start accumulating dollars on a daily basis a week in advance.”

‘The Problem’

The full-year trade deficit is unlikely to exceed $8 billion, Ho Chi Minh City-based fund manager Dragon said this month. Last year’s record trade gap was an estimated $17.5 billion. Through July, exports weakened 13 percent to $32.35 billion while imports slumped 32 percent to $35.73 billion.

“The problem is that a lot of the imports in Vietnam are not for consumption, they’re adding to its productive capacity,” said Robinson. “So whenever imports are that weak it points to weak future exports.”

The decline in exports this year has been due to lower prices, as volumes have increased, Vinacapital Investment Management Ltd. said last week. Reduced foreign investment as international companies cut back amid a global recession may also be hurting overseas sales.

Balance of Payments

“Domestic enterprises have seen their exports remain steady,” Vinacapital said in a research note. “Foreign- invested enterprises have seen exports drop.”

A “steep” decline in imports is easing pressure on the country’s balance of payments, Moody’s Investors Service said last week.

Vietnam’s trade deficit in recent years as a percentage of the economy “far exceeds” those of other Southeast Asian nations before the region’s 1997 financial crisis, suggesting the gap is a potential threat, according to a study for the Asia Pacific Economic Cooperation forum released this month.

Concern over Vietnam’s economic indicators increased last year as the trade deficit surged and inflation soared to 28.3 percent, the highest since at least 1992. This month’s slowdown in inflation was the 11th consecutive decline.

“Inflation will probably bottom in August at roughly 2 percent, as the fuel-price hike of last year drops out of the annual comparison,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note today. “The State Bank of Vietnam is now getting concerned about rapid credit growth.”