VietNamNet Bridge - The estimated overseas remittance to Vietnam in 2016 is expected to be roughly $5 billion, or 10 percent lower than the forecast of $5.5 billion. 

Deputy director of the State Bank of Vietnam’s HCM City Branch Nguyen Hoang Minh said the overseas remittance to the city had reached $4.3 billion by the end of November. The remittance mostly comes in the last quarter of year, which accounts for 40 percent of total yearly remittance.

It is expected that Vietnam will receive $9 billion in overseas remittances by the end of the year, lower than the predicted level of $11-12 billion.

Overseas remittances, or kieu hoi, are sent by overseas Vietnamese to their relatives in Vietnam. The money is used to cover their needs in daily life or put into investments. 

The overseas remittances to HCM City, the biggest recipient, and to Vietnam in general, will be lower than initially expected. 

Observers note that remittances nearly stopped in November because of the effects of the US election. The victory of Trump who advocates policies to protect the US economy and appreciate the dollar caused a slowdown in remittances.

Remittances from the US account for 60 percent of total overseas remittances.

The possibility of the US FED raising the prime interest rate has also prompted overseas Vietnamese to hold dollars instead of remitting dollars to Vietnam, where dollar deposits have the unattractive interest rate of zero percent.

Observers also commented that since TPP (Trans Pacific Partnership) Agreement is likely to fail because of Trump’s protectionism, people may remit less to pour into investment projects. 

As overseas remittances begin to decrease, this will affect Vietnam’s economy, because remittances are an important source of capital for the country. 

An official report shows that 72 percent of overseas remittances go to production and business projects, and 21 percent to the real estate market.

However, government officials denied that the decrease in kieu hoi would affect the foreign currency supply, thus affecting the dong/dollar exchange rate.

Can Van Luc, a respected economist, said the dong won’t lose more than 2 percent of its value in 2017.

Luc told the local press that though the exchange rate would be under pressure in 2017, it will still be under the State Bank’s control thanks to foreign exchange reserves ($40 billion), foreign direct investment disbursement, ODA (official development assistance) and other capital sources.

Kim Chi