VietNamNet Bridge – The weakening of the Euro will not have big influences to Vietnam’s macro economy, because the number of transactions remains modest. However, Euro holders will surely incur loss when the currency depreciates.

The public debt crisis in Europe has been threatening the Euro. How will the fate of the currency affect Vietnamese import-export enterprises?

Ups and downs

In fact, the dong/euro exchange rate has not fluctuated heavily in recent days. In early December 2011, one Euro was converted into 28,656 dong, while on December 8, the Euro price decreased by 98 dong per Euro to 28,558 dong.

It is quite a surprise in Vietnam that the Euro deposit interest rates offered by some small banks are relatively high at 3-4 percent per annum, while big banks only pay 0.5 percent. Especially, while the dong deposit interest rate has been kept at 14 percent per annum and dollar at 2 percent per annum, banks have raised non-dong and non-dollar interest rates.

Explaining this, analysts say that banks cannot pay higher for dong and dollar deposits, because the central bank has sent the caps of 14 percent and 2 percent for the deposits. Meanwhile, no cap has been set on the deposits in other foreign currencies. Therefore, banks try to mobilize capital in other foreign currencies and then convert the capital for dong and dollar to ease their liquidity problem.

While the Euro interest rate tends to rise slightly in Vietnam, the interest rate keeps unchanged in the international market. However, the euro/dollar exchange rate has been fluctuating all the time in recent days. On November 25, one euro was converted to 1.32 dollars only. Then the euro price rose to 1.34 dollars on December 7, but later decreased to 1.33 dollars on December 8.

Bankers say that Vietnamese businesses still use dollars in the transactions with foreign partners, therefore the demand for Euro remains low. Only a few of enterprises make payment in the Euro when making trade with European partners. However, they have anticipated the fluctuations of the dollar/euro exchange rate; therefore, they would not incur loss when the Euro depreciates.

Most of the exports to the world, including to the Eurozone, have been paid in dollars. Therefore, the weakening of the Euro will in no way affect businesses’ profits.

Businesses wish to see market stabilized

Analysts believe that when the Euro depreciates, this means that the dollar will appreciate in the international market. If so, this would make Vietnamese goods on the European market become more expensive, thus making Vietnamese goods less competitive in terms of prices.

Some exporters have revealed that they can see signs of the reductions of the orders from Europe, and that they are not optimistic about the trade with European partners in 2012. Meanwhile, some businesses which specialize in exporting products to Europe, said they have realized some changes in the way of doing business of the European partners.

Dr Le Tham Duong from the HCM City Banking University also thinks that the Euro weakening would not have big impacts on Vietnam’s macro economy, but Euro holders would suffer because of the Euro value decrease. He also believes that businesses would not suffer from the Euro depreciation because they have good experiences in using capital.

Also according to Dr Duong, Eurozone’s countries planned to gather on December 8 to discuss the fate of the euro. However, it is now very likely to see the collapse of the Euro, since many countries would reach agreements on the bailouts.

Experts predicted that ECB would slash the prime interest rate in order to stimulate production to foster economic growth.

Source: NLD