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

Quang Ninh Customs seeks solutions to promote import and export

Quang Ninh Customs seeks solutions to promote import and export

VCN - Quang Ninh Customs Department has made efforts to synchronously deploy solutions to accompany, support and resolve difficulties for businesses, contributing to improving import and export activities through the area.
Coconut is expected to become a billion-dollar export item

Coconut is expected to become a billion-dollar export item

VCN - Talking to the press at the ceremony to launch the first train carrying fresh coconuts to China, Mr. Luu Van Phi, Director of the Department of Industry and Trade of Tien Giang province, said that Vietnam's agricultural export potential, especially fresh coconuts, is expanding with the appearance of international railway transportation from Song Than station.
Plastic exporters interested in converting to recycling technology

Plastic exporters interested in converting to recycling technology

VCN - The Vietnamese plastics industry is facing major challenges in terms of plastic waste and recycling needs. Secretary General of the Vietnam Plastics Association Huynh Thi My (pictured) shared important information about the transformation in production of plastics enterprises to meet increasing export demands.

Latest News

Many factors affecting tuna exports in the last months of the year

Many factors affecting tuna exports in the last months of the year

VCN - Tensions between Israel and Iran escalate, tuna businesses are worried, they may have to stop export orders to the Israeli market in the last months of the year.
Vietnam still dominates Philippine rice import

Vietnam still dominates Philippine rice import

Vietnam continues to assert its dominance as the top rice exporter to the Philippines, with 2.91 million tonnes shipped as of the late October, or over 79% of the Philippines' total rice imports, according to the Vietnam Trade Office in the Philippines.
Vietnam cements ties with partners to engage in global semiconductor, AI industries

Vietnam cements ties with partners to engage in global semiconductor, AI industries

By boosting cooperation with reputable partners across the globe, Vietnam is taking steps to gain a foothold in the world’s semiconductor and artificial intelligence (AI) industries.
Aquatic exports expected to rise in year-end despite challenges

Aquatic exports expected to rise in year-end despite challenges

Aquatic exports is expected to surge in the remaining months of this year, as the year-end festive season comes, despite many challenges in the international markets, according to insiders.

More News

Trade Defense: The Key to Success for Vietnamese Businesses

Trade Defense: The Key to Success for Vietnamese Businesses

VCN - From losses and near bankruptcy, many domestic enterprises have recovered thanks to timely application of trade defense measures. Trade defense is also an effective shield for Vietnamese enterprises against a series of lawsuits from importing countries, thereby maintaining advantages and developing on "away grounds".
Lao Cai Customs sees a triple-digit surge in export-import turnover

Lao Cai Customs sees a triple-digit surge in export-import turnover

VCN - Updated from the beginning of the year to October 24, total import and export turnover through Lao Cai Customs Department increased by 102%.
Logistics sector must embrace innovative trends to stay competitive

Logistics sector must embrace innovative trends to stay competitive

The Vietnamese logistics industry must adapt to new trends and enhance infrastructure to remain globally competitive, speakers said at an event in Ho Chi Minh City on October 31.
Vietnam’s agro-forestry-aquatic product exports likely to set new record

Vietnam’s agro-forestry-aquatic product exports likely to set new record

Vietnam’s agro-forestry-aquatic product exports are likely to achieve a record high of 62 billion USD in 2024, said Deputy Minister of Agriculture and Rural Development Phung Duc Tien.
UKVFTA greatly benefits Vietnam-UK trade: Experts

UKVFTA greatly benefits Vietnam-UK trade: Experts

The UK-Vietnam Free Trade Agreement (UKVFTA), signed into law three years ago, has clearly benefited trade cooperation between the two countries, particularly in the context of Vietnam’s exports to most other major markets declining due to geopolitical tensions and headwinds in the global economy, said experts at a conference in Hanoi on October 30.
Agricultural exports likely to exceed 60 billion USD amid challenges

Agricultural exports likely to exceed 60 billion USD amid challenges

With swift production recovery and continued growth, Vietnam's agricultural sector could potentially surpass the 60 billion USD export target, according to the Ministry of Agriculture and Rural Development (MARD).
Vietnam-Philippines trade likely to exceed 8 billion USD for first time

Vietnam-Philippines trade likely to exceed 8 billion USD for first time

With the current rising trend, trade between Vietnam and the Philippines is likely to exceed 8 billion USD for the first time to hit about 8.5 billion USD in 2024, with Vietnam’s surplus of more than 3 billion USD, according to the Vietnamese Trade Office in the Philippines.
A bitter nut

A bitter nut's surprisingly sweet export success

VCN - The latest statistics from the General Department of Vietnam Customs show that in the first 15 days of October (October 1-15), Vietnam's coffee exports reached 21,489 tons, with a turnover of US$125.8 million.
Vietnam

Vietnam's daily import expenditure surpasses VND25,000 billion

VCN - From the beginning of the year to mid-October, on average, Vietnam spent more than USUS$1 billion (equivalent to more than VND25,000 billion) each day importing goods.
Read More

Your care

Latest Most read
Many factors affecting tuna exports in the last months of the year

Many factors affecting tuna exports in the last months of the year

VCN - In recent years, Israel has always been Vietnam's leading tuna export market after the US and the EU. Therefore, the recent escalation of Israel-Iran tensions is affecting Vietnam's tuna exports to this market.
Vietnam still dominates Philippine rice import

Vietnam still dominates Philippine rice import

Vietnam continues to assert its dominance as the top rice exporter to the Philippines, with 2.91 million tonnes shipped as of the late October, or over 79% of the Philippines' total rice imports, according to the Vietnam Trade Office in the Philippines.
Vietnam cements ties with partners to engage in global semiconductor, AI industries

Vietnam cements ties with partners to engage in global semiconductor, AI industries

By boosting cooperation with reputable partners across the globe, Vietnam is taking steps to gain a foothold in the world’s semiconductor and artificial intelligence (AI) industries.
Aquatic exports expected to rise in year-end despite challenges

Aquatic exports expected to rise in year-end despite challenges

Aquatic exports is expected to surge in the remaining months of this year, as the year-end festive season comes, despite many challenges in the international markets, according to insiders.
Trade Defense: The Key to Success for Vietnamese Businesses

Trade Defense: The Key to Success for Vietnamese Businesses

VCN - From losses and near bankruptcy, many domestic enterprises have recovered thanks to timely application of trade defense measures. Trade defense is also an effective shield for Vietnamese enterprises against a series of lawsuits from importing countr
Mobile Version