State Bank of Viet Nam to keep calm and carry on

The State Bank of Viet Nam (SBV) would continue to follow a pro-active and flexible monetary policy as well as working in close conjunction with fiscal and other policies to control inflation and support economic growth in 2019.

 

SBV Deputy Governor Nguyen Thi Hong made the statement at a banking forum titled "For Vietnamese Banks Further Development" held in Ha Noi yesterday.

Hong said the central bank targeted a 13 per cent increase of total means of payment and credit growth of 14 per cent this year, but adding adjustments could be made in accordance with the situation.

The SBV would help stabilise the monetary market through the use of open market operation (OMO) measures to regulate liquidity among credit institutions.

At the same time, the central bank would also regulate the interest rate and USD/VND exchange rate policies in line with the Governments targets and market movements, Hong said.

She said the SBV would take intervention measures when necessary to stabilise the local foreign currency market.

With a net purchase of US$8.35 billion to date this year, the central bank has increased the nations foreign reserve to some $69 billion. The result was positive as it was many times higher than the countrys $711 million trade surplus in the first four months of the year.

The ample foreign currency source would help the SBV more actively regulate the exchange rate and easily take measures to stabilise the forex market if necessary.

Hong also believed the stabilisation of the USD/VND exchange rate would create favourable conditions for the countrys production and business, FDI attraction and exports.

By the end of the first quarter of 2019, the USD/VND exchange rate listed at commercial banks was relatively stable compared to the beginning of the year, with the US dollar appreciating only VND25 against the end of last year.

Experts forecast the exchange rate would remain stable in the second quarter, buoyed by a high interest rate gap between the Vietnamese dong and dollar deposits, robust FDI sources, a healthy current account surplus and no interest rate hikes expected by the US Federal Reserve (Fed) and other large countries central banks.

Vo Tri Thanh, former deputy director of the Central Institute for Economic Management (CIEM), said the interest and exchange rates had been relatively stable in the first months of 2019.

Though there remained pressure on the exchange rate due to US-China trade tensions and domestic inflation in the remaining months of the year, Thanh forecast the dollar would appreciate only 2 per cent against the dong this year thanks to rising foreign reserves and growing foreign investment inflow.

In a recent report, analysts from Fitch Groups Fitch Solutions Macro Research also forecast that ample foreign exchange reserves would help the SBV continue its course of active interventions to ensure currency stability, which suggested the dong was likely to see minimal volatility over the coming months.

“The dong will weaken slightly against the dollar to VND23,700 by the end of the year and average VND23,440 per dollar over 2019, which represents a 1.8 per cent depreciation from the average in 2018,” the analysts said in the report.

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