Rising import value caused rates to fluctuate: NFSC
Rising import value caused rates to fluctuate: NFSC
The fluctuation of foreign exchange in the first quarter was due to a sharp rising import value, according to the National Financial Supervisory Commission (NFSC).
Statistics from the General Department of Customs indicated that the country’s trade deficit in the first quarter of this year was roughly US$1.9 billion, compared with a trade surplus of roughly $1 billion in the same period in 2016. The trade deficit in Q1 of 2017 was equal to 4.4 per cent of the country’s total export revenue in the period.
Experts said that the main reason for the rising import value was the strong increase in the demand for imported machinery and equipment, due to stronger economic growth prospects in 2017.
The NFSC, the Government’s financial watchdog, said that after declining in the first month of the year, the VND/US$ exchange rate at commercial banks has risen significantly since mid-February and often approached the cap listed by the central bank. By March 20, the dollar was quoted at VND22,820 per dollar, up roughly 0.13 per cent against early this year.
In the unofficial market, the dollar also accelerated to hit VND23,000 per dollar in the first half of February. It has cooled down since and is now close with that listed by commercial banks.
The central bank’s reference exchange rate by March 20 was also adjusted up 0.47 per cent, the NFSC said.
The NFSC also forecast that the country’s foreign currency supply source in the entire 2017 could be at a disadvantage compared with last year due to the trade deficit. Last year, the country’s trade surplus hit an 11-year-high of more than $2.52 billion. However, a high trade deficit was forecast for 2017. The government has planned a trade deficit that was to equal roughly 3.5 per cent of the country’s total export value.
The country’s foreign currency supply source this year was also forecast to reduce in the wake of a restriction of official development assistance (ODA) sources from July this year. According to released itineraries, the World Bank is due to stop the preferential ODA sources for Viet Nam from July this year.
NFSC also noted the volatility of the yuan and stated that a sharp devaluation in the currency would make a big negative impact on Viet Nam’s economy due to the country’s rising trade deficit with China. The trade deficit rose to $28 billion in 2016 from $23.7 billion in 2013.
If compared with the GDP, Viet Nam’s trade deficit with China was 14 per cent, which was much higher than the 2 per cent trade deficit of the United States (US) and China, the NFSC noted.
The committee forecast that the US Federal Reserves (Fed)’s interest rate hike has not caused any pressure on the foreign exchange in 2017 as the interest rate of dong deposits are still more attractive than the dollar deposits.
According to the central bank, interest rate averages between 4.8 per cent and 5.4 per cent per year for dong deposits below six months, 5.6 per cent to 6.7 per cent per year for 6- to 12-month dong deposits and 6.7 per cent to 7.4 per cent per year for dong deposits above 12 months. The interest rate for dollar deposits is zero per cent.
