Exchange rate in Vietnam forecast to be stable in 2019

The dong will average VNĐ23,440 per dollar over 2019, which represents a 1.8 per cent depreciation from the average of 2018.

No huge pressure on exchange in 2019: experts

Macroeconomic indexes support VND: experts

VN Central Bank increases reference exchange rate, foreign-exchange reserves 

Exchange rate in Vietnam forecast to be stable in 2019

The Vietnamese dong would remain stable against the US dollar in the near future, supported by the country’s robust foreign direct investment (FDI), a healthy current account surplus, and by the central bank’s active intervention, experts forecast.

According to analysts from the Fitch Group’s Fitch Solutions Macro Research, the dong will weaken slightly against the dollar to VND23,700 by the end of the year, and average VND23,440 per dollar over 2019, which represents a 1.8 per cent depreciation from the average of 2018.

Analysts attributed the modest weakness expectation to three reasons.

First, they said, Viet Nam’s FDI will likely remain robust over 2019, adding Fitch continued to project the Vietnamese economy to be a regional outperformer with a growth of 6.5 per cent in 2019 compared to an aggregate of 6.1 per cent for Asia.

“We believe that FDI inflows into the manufacturing sector will be further supported by improved diplomatic relationships combined with the Government’s open-door trade policy, alongside favourable demographics such as Viet Nam’s educated and low-cost labour force,” the report noted.

The Vietnamese processing and manufacturing sector remained the largest sector for FDI last year, with total registered capital of US$16.6 billion, up 4.4 per cent from $15.9 billion from the previous year.

Viet Nam’s strong economic growth outlook will also continue to attract FDI in the real estate sector as foreign developers look to capitalise on the rising affluence of the population and the desire for physical expansion among businesses. Real estate businesses attracted total FDI of $6.6 billion in 2018, more than doubling the $3.1 billion in 2017.

 

Second, Fitch forecast Viet Nam’s current account surplus to print around 2.1 per cent of GDP in 2019, which represents an expectation for the surplus to narrow slightly from 2.2 per cent in 2018.

Viet Nam is one of the two countries running a current account surplus among the Mekong region countries, with the other being Thailand which ran a 7.5 per cent surplus in 2018. The other countries, namely Laos, Cambodia, and Myanmar are running current account deficits in excess of 2 per cent.

“We continue to expect the current account surplus to be supported by the export-oriented manufacturing sector, helped by a possible rebound in global trade in the second half of 2019,” the report said.

Viet Nam’s goods trade surplus came in at $6.8 billion in 2018, on the back of a 13.8 per cent expansion in exports and a 12.1 per cent increase in imports.

Third, at $56.3 billion, representing 2.8 months of import cover, the State Bank of Viet Nam (SBV) has ample foreign exchange reserves to continue its course of active intervention to ensure currency stability, which suggests that the dong is likely to see minimal volatility over the coming months.

Over the long term, Fitch forecast the dong to weaken gradually against the dollar to due to higher inflation, but a relatively strong growth outlook is likely to put a floor under the depreciation of the currency.

“We forecast inflation in Viet Nam to average around 4.1 per cent over the next 24 months, as compared with 2.3 per cent in the US.”

According to Fitch, the SBV, utilising credit growth targets as its main monetary policy tool, is targeting credit growth of 14 per cent in 2019, the same rate achieved in 2018. At 14 per cent, credit growth still outpaces nominal GDP growth of about 10 per cent and this is likely to fuel inflationary pressures over the coming quarters.

“Given the Vietnamese economy’s reliance on export-led growth, upside price pressures is likely to warrant some dong depreciation against the US dollar to preserve Viet Nam’s export competitiveness, and we believe that this is likely to see the dong average VND23,850 per dollar in 2020,” Fitch forecast, adding the Vietnamese dong’s overvaluation, as suggested by its real effective exchange rate trading by 9.3 per cent above its 10 -year average, open room for further currency weakness over the longer term.

However, Fitch also noted: “Risks to the dong forecast are weighted to the downside. A dovish shift among major global central banks could see the SBV intervene to weaken the dong by more than we expect so as to maintain Viet Nam’s export competitiveness. Slowing global growth, trade uncertainty, and disruptions to global value chains could also adversely impact Viet Nam’s export sector, pressuring the SBV to weaken the dong further.” — VNS

 
 

Other News

.
Banks put pedal to the metal in digital transformation
Banks put pedal to the metal in digital transformation
BUSINESSicon  10/10/2020 

The banking industry has been recently abuzz with digital transformation as lenders embark on their journey to become more tech-enabled to keep pace with disruptive technologies.

12 loss-making mega-projects proceed slowly
12 loss-making mega-projects proceed slowly
BUSINESSicon  10/10/2020 

The assets of the 12 loss-making mega-projects under the Ministry of Industry and Trade (MOIT) total VND59.1 trillion, while total accounts payable is VND63.3 trillion.

Equitisation doesn't necessarily mean a better future for SOEs
Equitisation doesn't necessarily mean a better future for SOEs
BUSINESSicon  10/10/2020 

Equitisation should be a magic wand to improve the performance of a State-owned enterprise (SOE), but in some cases, it is not.

Banks push bancassurance amid low credit growth
Banks push bancassurance amid low credit growth
BUSINESSicon  09/10/2020 

Banks are pushing the sale of life insurance products (bancassurance) in the context of low credit growth since the beginning of this year due to the impacts of the COVID-19 pandemic.

Sound direction for Vietnam’s chances of economic revival
Sound direction for Vietnam’s chances of economic revival
BUSINESSicon  09/10/2020 

Despite heavy aftermaths caused by the global health crisis, the Vietnamese economy remains in positive growth in the first nine months of the year on the back of the government’s sound responses to curb the pandemic return.

Reforms to cut unwanted administrative processes
Reforms to cut unwanted administrative processes
BUSINESSicon  09/10/2020 

In a bid to boost institutional reforms towards a modern market economy, further abolishing and reducing business regulations to create a bigger space for the private sector to develop will serve as a new driving force 

Rising handling charges neccessary to advance
Rising handling charges neccessary to advance
BUSINESSicon  09/10/2020 

International shipping lines are expected to face an increase of 12 per cent in domestic container handling service charges at Vietnamese seaports from early 2022, triggering concerns over a possible charge burden on local shippers.

Fish sauce producers in a tight spot
Fish sauce producers in a tight spot
BUSINESSicon  09/10/2020 

Traditional fish sauce is one of the most typical components in Vietnamese cuisine and while its nutritional value has been analysed thoroughly, getting EU customers to consume it more regularly remains a challenge.

Tra fish famers, exports hit hard by Covid-19 pandemic
Tra fish famers, exports hit hard by Covid-19 pandemic
BUSINESSicon  09/10/2020 

Tra (pangasius) fish prices have dropped to their lowest levels in 11 years since exports have been hit by Covid-19, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

September surprise: fruit prices soar to record high
September surprise: fruit prices soar to record high
BUSINESSicon  09/10/2020 

Passion fruit, pomelo, dragon fruit and fresh coconut have been exported to Europe in large quantities under the EVFTA, which took effect this year.

Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
BUSINESSicon  09/10/2020 

The ITA shares of the Tan Tao Group unexpectedly witnessed an impressive trading session with a record high trading volume.

VN rice exporters gear up to penetrate EU arena
VN rice exporters gear up to penetrate EU arena
BUSINESSicon  08/10/2020 

Vietnamese companies have been stepping up investment to boost rice exports to Europe – however, it remains a challenging task penetrate the market efficiently.

VRDF highlights advantages of value chain development
VRDF highlights advantages of value chain development
BUSINESSicon  08/10/2020 

Amid the heavy impact the pandemic has had so far on Vietnam’s economy, possible solutions to overcome the crisis and come out even stronger have been under discussion at this year’s Vietnam Reform and Development Forum.

Plastic stocks surge in two months, boosted by low production cost
Plastic stocks surge in two months, boosted by low production cost
BUSINESSicon  08/10/2020 

Listed plastic companies have seen their market values expand 15-50 percent in the last two months on low oil prices and increased consumption.

Husbandry to undergo modernisation
Husbandry to undergo modernisation
BUSINESSicon  08/10/2020 

New technologies from the fourth Industrial Revolution will be applied in livestock breeding in order to produce safe and high-quality output while improving the husbandry sector’s competitive edge,

Businessman leaves after 16 years of building fortune
Businessman leaves after 16 years of building fortune
BUSINESSicon  08/10/2020 

The long battle inside the biggest construction company in Vietnam has come to an end with the departure of a successful businessman.

VN issues action plan to implement National Energy Development Strategy
VN issues action plan to implement National Energy Development Strategy
BUSINESSicon  08/10/2020 

Vietnam aims to raise its renewable energy sources to 15-20 per cent of the total energy supply by 2030 and 25-30 cent by 2045.

Trade surplus reaches $7.2 billion
Trade surplus reaches $7.2 billion
BUSINESSicon  07/10/2020 

Vietnam’s total import-export turnover for agricultural, forestry and fishery products in January-September was estimated at nearly US$52.8 billion, making for a trade surplus of $7.2 billion,

Additional economic relief packages in the pipeline
Additional economic relief packages in the pipeline
FEATUREicon  07/10/2020 

The Government is drafting second economic relief packages aimed at assisting the national economy, especially businesses, in the face of the ongoing COVID-19 crisis.

Local manufacturing industry enjoys solid growth in September
Local manufacturing industry enjoys solid growth in September
BUSINESSicon  07/10/2020 

Manufacturing sector returned to growth in September as concerns around the outbreak of the COVID-19 pandemic in the country eased. Both output and new orders increased, while business confidence strengthened, and the rate of job cuts softened.

 
 
 
Leave your comment on an article

OR QUICK LOGIN