Dong devaluation expected

26-Jul-2016 Intellasia | Bizhub | 6:00 AM Print This Post

The central bank is expected to devalue the dong against the US dollar by 2-3 per cent in the second half of this year to support exports and fight against the dollarisation in the local economy, according to a Vietinbank report.

In the recent report on expected financial market developments in the second half, Vietinbank analysts said that an expected trade deficit in H2 would put pressure on the exchange rate.

According to Vietinbank, export growth is forecast to decline in H2, possibly causing the dollar supply to remain at a low level.

The Ministry of Industry and Trade (MoIT) forecast after a sluggish export growth in H1, exports in H2 will face additional challenges and fail to meet its export growth target of 10 per cent set by the National Assembly for this year.

In a regular Cabinet meeting this month, the ministry reported that exports would only grow 8 per cent this year.

In H1, export turnover slowed down against the same period last year, rising only 5.9 per cent to $82.28 billion. According to the MoIT, the export growth was much lower than the 9.2 per cent rising rate seen in H1 2015.

Industry insiders attributed the sluggish export to decreasing demand in world markets due to global economic difficulties. Some other regional countries such as Malaysia, Thailand and China even saw a negative export growth, they said.

In the report, Vietinbank analysts also suggested the State Bank of Vietnam pay special attention to movements by the People’s Bank of China (PBoC) as its policies would put pressure on the USD/VND exchange rate due to the deep trade ties between Vietnam and China. The PBoC devalued its yuan by 5.32 per cent to date this year.


Category: Finance, Vietnam

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