VND Constant depreciation is detrimental to exports

VCN - In an interview with Customs News, Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervisory Commission and a member of the National Monetary and Financial Policy Advisory Council, said that Vietnam is trying to stabilize the exchange rate, mainly to limit inflation; therefore, a higher export growth target may have to be sacrificed.
Ho Chi Minh City: Challenges to exports in the second half of the year Ho Chi Minh City: Challenges to exports in the second half of the year
State Reserve sector allocates national reserve goods worth over VND752 billion State Reserve sector allocates national reserve goods worth over VND752 billion
Quang Ninh Customs seizes infringing goods worth VND2.6 billion Quang Ninh Customs seizes infringing goods worth VND2.6 billion
Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervision Commission, member of the National Financial and Monetary Policy Advisory Council
Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervision Commission, member of the National Financial and Monetary Policy Advisory Council

How do you assess the impacts leading to the recent significant gap in USD and VND exchange rates over time?

The strongest interest rate hike in 28 years by the US Federal Reserve (FED) had a strong impact on the global financial system, as well as increased the USD price. Accordingly, the USD index (DXY) has uninterruptedly "crushed" the old record highs, from 98 to 108 points. However, despite the sharp inflation increase of 9.1%, the dollar set a record price which proves that inflation in other countries is also very high and currencies in the currency basket are depreciated sharply against the US dollar.

In Vietnam, the 6-month average inflation rate is only 2.44%, so the VND should have appreciated against the USD because Vietnam's inflation is much lower than that of the US. This has resulted from the State Bank of Vietnam (SBV)'s policy of ensuring the stability of the foreign currency market as well as complying with commitments to avoid falling into a situation of "currency manipulation" with the US Department of Finance. As a result, the VND exchange rate maintains a relatively low devaluation compared to many other currencies in the region.

However, VND is under pressure to depreciate because Vietnam's current account deficit is relatively high. Therefore, Vietnam is trying to stabilize the exchange rate, mainly to stabilize inflation. After a short time, the SBV was forced to sell foreign currency reserves to stabilize the exchange rate and balance the supply and demand of imports. This can be prolonged as Vietnam's export growth rate compared to the previous year has decreased from 29% to 17%.

What fluctuation is exposed to the VND this year?

Until now, VND has only decreased by approximately 2%, so by the end of the year, VND will only decrease by 2.5%. This is also a great restraint of the State Bank which brings positive performance. If this exchange rate can be maintained until the end of this year, next year Vietnam may not be affected much by the international economic situation which is expected to be very bad.

How will the devaluation of the VND affect Vietnam's import and export activities, sir?

The DXY index increased strongly but compared to six other major currencies, not against VND, so other countries exporting to the US at this time benefited because of the appreciation of the USD. But Vietnam's exports to the US do not benefit much due to a slight appreciation of 2% of the USD against the VND while this difference in other currencies is 9-10%. However, at present, the SBV is focusing on fighting inflation and stabilizing the macro-economy, so we may have to sacrifice the target of higher export growth.

Moreover, in my opinion, the concessive depreciation of VND against the USD will not only harm exports but also threatens import inflation, because most of Vietnam's exports have high import value content which not to mention many products produced for domestic consumption must also import raw materials from abroad. Exchange rate stability is an important goal to control cost-push inflation today

Amid complicated developments in the commodity and foreign exchange markets, what should import-export businesses pay attention to ensure stable payment cash flow, sir?

Enterprises must pay attention to the exchange rate between VND and foreign trade payment currencies, in order to choose competitive export and import markets as well as favorable payment currency. Businesses should diversify international payment currencies, avoiding using only USD.

Notably, inflation, the Russia-Ukraine war, the pandemic, etc. have all affected some of Vietnam's key markets, so it is important to build a medium-term trade strategy based on new market data in case the above condition persists.

In addition, large and frequent import-export businesses should choose banks with good trade finance ability, providing simple and convenient exchange risk prevention services. Enterprises can use swap contracts (SWAPs), and forward sales contracts to ensure that import and export activities are planned in a scientific and long-term manner.

That also creates confidence for the donor bank as well as international customers, to be able to cope with any market risks, including supply chain disruptions, inflation risks, and currency risks.

Thank you very much!

Huong Diu (recorded)/ Thu Phuong

Related News

Mid-November: Vietnam

Mid-November: Vietnam's trade volume matches 2023 total, eyes record-breaking growth

VCN - By mid-November 2024, Vietnam's total import-export turnover reached an impressive US$681.48 billion, equaling the full-year trade figure for 2023
New export and business cooperation opportunities from "dual conversion"

New export and business cooperation opportunities from "dual conversion"

VCN - According to a recent study from NielsenIQ, 16% of Vietnamese consumers consider a sustainable future as one of the important factors in their consumption decisions.
Why seafood exports to some Middle Eastern Countries are stalled

Why seafood exports to some Middle Eastern Countries are stalled

VCN - Several shipments of seafood exported to certain Middle Eastern countries have been delayed due to legal challenges related to consular legalization procedures. This has created significant bottlenecks in accessing these markets.
Businesses need support from vietnamese representative offices abroad

Businesses need support from vietnamese representative offices abroad

VCN - Several heads of Vietnamese representative offices abroad believe that Vietnamese businesses need to prepare solutions to respond to the changing global economy and meet the increasing demands of the international market.

Latest News

Agricultural, forestry and fishery trade surplus value shoots up

Agricultural, forestry and fishery trade surplus value shoots up

VCN - According to the Ministry of Agriculture and Rural Development, the total export turnover of agricultural, forestry and fishery products in the first 10 months reached 51.74 billion USD, up 20.2% over the same period in 2023. Notably, the trade surplus value recorded a spectacular increase year on year.
VN

VN's food processing industry struggles to improve quality and value chain integration

Despite accounting for 19.1 per cent of Việt Nam’s processing sector, the food processing industry has been struggling with major issues such as poor-quality raw materials and subpar value chain integration, said industry insiders and economists.
Approach strategy of the seafood industry when implementing UKVFTA

Approach strategy of the seafood industry when implementing UKVFTA

VCN - As one of Vietnam's strong export industries to the UK, especially when the Vietnam - United Kingdom of Great Britain and Northern Ireland Free Trade Agreement (UKVFTA) comes into effect, with a detailed information approach strategy, it has created a great driving force to promote the export of Vietnamese seafood products to this market.
Vietnamese enterprises facing challenges from cross-border e-commerce platforms

Vietnamese enterprises facing challenges from cross-border e-commerce platforms

VCN – In recent years, with the rapid development of cross-border e-commerce (CBEC) platforms, domestic enterprises in Vietnam have been facing numerous difficulties and challenges.

More News

Vietnam, Malaysia eye new milestone in trade ties

Vietnam, Malaysia eye new milestone in trade ties

The official visit to Malaysia from November 21-23 by Party General Secretary To Lam is expected to open up new opportunities for and mark a new milestone in the economic and trade cooperation between Vietnam and Malaysia. Vietnam and Malaysia are key economic, trade, and investment partners. Their economic and trade ties have steadily grown since the two nations established diplomatic relations in 1973.
Shrimp exports surge in 10 months, generating 3.2 billion USD

Shrimp exports surge in 10 months, generating 3.2 billion USD

Vietnam’s shrimp exports in October reached US$394 million, a strong 24% increase year-on-year, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).
Vietnam’s exports to the U.S. near US$100 billion milestone

Vietnam’s exports to the U.S. near US$100 billion milestone

VCN - By the end of October, Vietnam's exports to the United States approached US$100 billion, reaffirming its position as Vietnam's largest export market.
From the “abnormal” coffee price, worries about the new crop

From the “abnormal” coffee price, worries about the new crop

VCN - The Vietnamese coffee industry enters the new crop with the question of what is a reasonable price to ensure benefits for coffee growers while still retaining international consumers.
What obstacles limit the market share of Vietnamese goods in the UK?

What obstacles limit the market share of Vietnamese goods in the UK?

VCN - Vietnamese goods account for only about 1% of total imports into the UK market. One of the reasons is that they have not yet built their own brands and have not focused on effective strategies and approaches to market information.
Storm No. 3 destroys profits of many insurance companies

Storm No. 3 destroys profits of many insurance companies

VCN - Due to the impact of storm No. 3, the business results of the third quarter and the first 9 months of 2024 of the insurance sector have been significantly affected. This requires more efforts from businesses for the results of the whole year 2024.
Vietnam, Malaysia eye golden partnership opportunities in Halal industry

Vietnam, Malaysia eye golden partnership opportunities in Halal industry

Cooperation in the Halal industry can help Vietnamese products reach nearly 2 billion Muslim consumers worldwide, representing over 24% of the global population, according to Malaysia’s Minister of Investment, Trade, and Industry Zafrul Abdul Aziz.
Tra fish sector aiming for production, processing greening for sustainable development

Tra fish sector aiming for production, processing greening for sustainable development

Greening production and processing to meet export requirements is both a trend and a necessity for many industries, including the tra fish sector.
Developing supporting industries for the billion-dollar export commodity groups

Developing supporting industries for the billion-dollar export commodity groups

VCN - Electronic products and components are one of export commodity groups with turnover exceeding one billion USD, but the supporting industry for this group is still modest.
Read More

Your care

Latest Most read
Agricultural, forestry and fishery trade surplus value shoots up

Agricultural, forestry and fishery trade surplus value shoots up

VCN - According to the Ministry of Agriculture and Rural Development, the total export turnover of agricultural, forestry and fishery products in the first 10 months reached 51.74 billion USD, up 20.2% over the same period in 2023. Notably, the trade surp
New export and business cooperation opportunities from "dual conversion"

New export and business cooperation opportunities from "dual conversion"

According to a recent study from NielsenIQ, 16% of Vietnamese consumers consider a sustainable future as one of the important factors in their consumption decisions.
VN

VN's food processing industry struggles to improve quality and value chain integration

Despite accounting for 19.1 per cent of Việt Nam’s processing sector, the food processing industry has been struggling with major issues such as poor-quality raw materials and subpar value chain integration, said industry insiders and economists.
Approach strategy of the seafood industry when implementing UKVFTA

Approach strategy of the seafood industry when implementing UKVFTA

VCN - Mr. Nguyen Hoai Nam, Deputy General Secretary, Vietnam Association of Seafood Exporters and Producers (VASEP), said that the advantage that UKVFTA brings is that the main products of the seafood industry enjoy 0% import tax to the UK, especially key
Mid-November: Vietnam

Mid-November: Vietnam's trade volume matches 2023 total, eyes record-breaking growth

By mid-November 2024, Vietnam's total import-export turnover reached an impressive US$681.48 billion, equaling the full-year trade figure for 2023
Mobile Version