ADB forecasts Vietnam’s forex reserve at $17b

13-Apr-2012 Intellasia | Vietbiz24.com | 7:01 AM

Vietnam’s forex reserve increased about 25 percent in the first quarter of 2012 in comparison with the end of 2011 after the State Bank of Vietnam (SBV)’s moves of positively purchasing foreign currency, Asian Development Bank (ADB) said at the press conference to announce the 2012 economic outlook report in Hanoi on April 11.

Dominic Mellor, economist of ADB in Vietnam said that Vietnam’s forex reserve increased to an estimate of $17 billion in the end of Q1/2012 from the level of $13.8 billion in Q4/2011.

However, the country’s forex reserve is currently equal to only about two months of imports, far below the safe level of 12-13 weeks of import, making the economy easily vulnerable to unfavourable evolutions of the world market, ADB emphasized.

Meanwhile, Vietnam targets to increase its forex reserve to 16 weeks of import in 2012, said Nguyen Sinh Hung, Chairperson of the country’s National Assembly at the Consultative Group (CG)’s meeting in Jun/2011.

The dong/US dollar forex has been kept stable for about four months recently, with the mid-point rate set daily by the central bank at 20,828 dong per dollar, unchanged since late December, following a lower-than-expected trade deficit in 2011 of $9.5 billion.

From next month, commercial banks will have to reduce their amount of foreign currency at the end of each day, following the central bank ruling to prevent dollar hoarding and control the foreign exchange market.

In addition, ADB has again adjusted down Vietnam’s gross domestic product (GDP) growth forecast this year to 5.5-5.7 percent (lower than the government’s expected level of about 6 percent) from previous forecasts of 6.3 percent and 6.5 percent. Economic growth is hurt by damped demand in consumption (both domestically and internationally), resulting from difficult market conditions and consumers’ tight budgets.

However, the local economy may expand by 6.2 percent in 2013, ADB projected.

Besides, ADB warned that the central bank should not ease the interest rates too rapidly to avoid short-term macroeconomic risks.

Currently, Vietnam does not publish data on forex reserve periodically.