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Vietnam’s February Trade Balance Swings to Deficit From Surplus

Vietnam’s trade balance swung to a deficit in February, reviving pressure on the currency to weaken after recent gains.

The shortfall this month was $800 million, compared with a revised $172 million surplus in January, according to preliminary figures released by the General Statistics Office in Hanoi today. For the first two months of the year, the deficit totaled $628 million. The statistics agency hasn’t reported a monthly trade gap exceeding the $1 billion mark since September.

Vietnam devalued the dong by about 7 percent a year ago as a persistent trade deficit and soaring prices hurt confidence in the nation’s economy. The currency has strengthened by about 1 percent this year after the government took steps to slow credit growth and Asia’s fastest inflation.

“As the year wears on, I expect production activity to improve, imported inputs to increase, and bigger monthly trade deficits,” Alan Pham, the Ho Chi Minh City-based chief economist at VinaCapital Group, said before the report.

The deficit narrowed last year to about $9.5 billion from $12.6 billion in 2010, based on preliminary data in December. The shortfall must reduce further to enable the central bank to ease monetary policy without “serious currency depreciation,” according to UBS AG, which estimates the trade gap may halve this year from 2011.

The government’s efforts to damp demand for imported goods have helped “relieve pressure” on the dong, Trinh D Nguyen, a Hong Kong-based economist at HSBC Holdings Plc., said in a report before today’s release.

Dong Appreciation

Still, weaker external demand and expectations of slower expansion will lead to a deceleration in export and import growth this year, Nguyen said. Vietnam was the largest seller of textiles and apparel to the U.S. in 2011 after China, according to data from the U.S. International Trade Commission.

The Vietnamese dong has climbed to 20,830 per U.S. dollar after losing more than 7 percent of its value against the American currency last year. Central bank Governor Nguyen Van Binh said last month the currency will gradually depreciate 2 percent to 3 percent this year.

Exports rose to $8.2 billion in February from $7.095 billion in January. For the first two months of the year, exports gained 24.8 percent from a year earlier to $15.295 billion.

Imports climbed to $9 billion in February from $6.923 billion in January. For the first two months, purchases from abroad advanced 11.8 percent to $15.923 billion.

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