Remittances 2021: Concern or optimistic?

21-Jan-2021 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

The World Bank’s Migration and Remittance Report announced with the forecast that Vietnam’s remittances in 2020 will decrease by more than 7 percent to $ 15.7 billion accounting for 5.8 percent of GDP. This is the first-time remittances to Vietnam have decreased since 2010. Previously, in 2019, this figure reached 17 billion USD, accounting for 6.5 percent of GDP.

However, according to this report, Vietnam continues to be on the list of the largest remittance recipients in 2020, despite the negative effects of the COVID-19 pandemic.

Currently, the statistics of remittances 2020 do not have official figures. It is particularly important to note that in addition to official remittances, according to many scholars, there is still a large amount of remittances sent back through informal channels so it is estimated that the exact number of remittances is recorded. This channel still takes time.

In the HCM City area, which always accounts for a large proportion (approximately one third) of the total remittances flowing into Vietnam each year, the State Bank of Vietnam HCM City branch said that in 2020, COVID-19 epidemic affects not small to the lives of overseas expatriates; but the amount of remittances transferred to HCM City is still stable.

Accordingly, Nguyen Hoang Minh, deputy director of the State Bank of HCM City Branch, said that in 2020, the amount of remittances transferred to HCM City is estimated at about 5.5 billion USD, up from 5.3 billion USD per year 2019. Previously, in the normal period and especially in recent years, HCM City always had an annual remittance growth rate of 8-10%, higher than the national average during the past 5 years. last year. Therefore, this year’s increase has also been seen as a decrease compared to normal and partly reflects the difficulty of migrant overseas Vietnamese and Vietnamese workers the main subjects of remittances in accumulating contribute to send back to relatives in the country.

Vietnam currently has about 5.3 million Vietnamese people living, working and studying in more than 130 countries and territories around the world. In the past 5 years, the World Bank estimated that the total remittances sent to Vietnam reached 71 billion USD, an average growth of 6 percent per year, of which 2018 and 2019 were 16 and 16.7 billion USD, respectively. Thus, Vietnam is the 9th largest remittance recipient in the world by 2020, ranking third in the East Asia Pacific region, after China and the Philippines.

Remittances did not decline in each region or declined very slightly in 2020 according to forecasts, on the one hand shows the resources and positive contributions of our expatriates from abroad to economic development and support for their relatives. domestic continued to be maintained. On the other hand, it also shows that this is a large foreign currency base that has helped Vietnam have more stable foreign currency revenues, increase national foreign exchange reserves, reduce dependence on foreign capital as well as pressure on billions of dollars. The price of the US dollar, contributing to the balance in the balance of trade payments last year. Besides, the high trade surplus of 19.1 billion USD is also compensating for the loss of direct investment capital with the decline decrease in total newly registered capital, capital, adjusted registered capital and value of capital contribution, share purchase (down 25 percent compared to the same period in 2019), and realised capital decreased by 2 percent compared to the previous year reached 20 billion USD (source: General Statistical Office). Thereby, helping the State Bank of Vietnam “open the road” in further consolidating foreign exchange reserves and stabilising the exchange rate.

Many credit institutions actively apply technology and connect Fintech to create channels for easy remittance transfer, sending and payment (photo: Eximbank connects with Hanpass to receive remittances from Korea starting from March 2020)

By 2021, the World Bank forecasts global remittances can drop as much as 14%, double the previously forecasted drop for 2020. In a general global difficult outline, according to one expert expected decline in remittances also need to be given a contingency scenario by the national monetary management agency with certain attention to flexibly adjust policies accordingly, while ensuring continued responses consistent with internal Vietnam and international law, not to keep a current account deficit.

According to the expert, in addition to the COVID-19 factor, the development of technology strongly applied by banks in remittances payment and converting foreign currency to VND is currently encouraging both remittances and remittances recipients transact through credit institutions or Fintech connected securely. However, note that the conversion to VND with low savings interest rates may reduce the attractiveness of this activity.

But in return, the stability and positive growth of the Vietnamese economy last year, set high expectations for high economic growth in 2021, on the other hand is also an advantageous factor that can strongly attract remittances to Vietnam looking for investment and business opportunities.


Category: Finance, Vietnam

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