According to forecasts by Nguyen Tri Hieu, a financial and banking expert, from then until the end of 2021, the epidemic would still have a strong impact on remittance, so it would not reach the revenue level of 2019. Remittances might recover in around 2022.
Remittances were no longer abundant
In recent years, the number of remittances had increased sharply. In 2019, Vietnam ranked ninth among the countries receiving the most remittances in the world. However, due to the recent impact of the Covid-19 epidemic, the number of overseas national currency exchange coming to Vietnam would not be as abundant as before.
The latest statistics of the State Bank of Vietnam (SBV) in Hochiminh City showed that, in the first seven months of 2020, remittance sales to Hochiminh City reached $3 billion, declined by 1.2 percent compared to the same period last year.
Because of the impact of the Covid-19 pandemic, many workers abroad lost their jobs, had to stay home temporarily, the business stopped, leading to a decrease in remittances for relatives.
Remittance companies said that remittances in the first two quarters of 2020 decreased significantly, especially from labour export markets such as Japan, Taiwan (China) and South Korea, also the one from traditional countries like USA, UK, Canada, Australia. Even, according to some companies, remittances had dropped sharply, in some places by 50 percent over the same period.
According to experts’ forecast, at present, the epidemic disease had not shown any sign of decreasing globally. Meanwhile, in Vietnam, the risk of a second outbreak was existing. Therefore, it was forecasted that remittance sales would continue to decline in the next quarter and was likely to decrease by 40 percent compared to last year.
Analysing the causes of the decline in remittances over the past time, Nguyen Tri Hieu said that remittances come from two sources, overseas nationals residing abroad and workers abroad, in which the sources from Vietnamese nationals accounted for the largest proportion.
However, from the beginning of 2020, the Covid-19 epidemic broke out in many countries around the world, especially in countries with many Vietnamese people living and working such as Russia, the United States, France. The number of expatriates in the United States accounted for up to 50 percent of expatriates residing worldwide.
Besides performing social distance, a series of social nail shops, restaurants, car repair shops of overseas Vietnamese had to close, which had affected the income, declining the remittance to relatives.
Not only that, the Covid-19 disease outbreak and spread in many countries around the world also hugely affected the labour export activities of Vietnam. As early as April, the Ministry of Labour, War Invalids and Social Affairs also issued a public dispatch on strengthening the implementation of urgent measures to prevent and control epidemics in the peak period, which required the Department of Overseas Labour Management business leaders temporarily stopped organising exit for workers until the outbreak was controlled in countries around the world. Therefore, the fact that ‘people did not go out; money would not come in’ was also one of the reasons for the reduction in remittances.
Overseas remittance revenue decreased by 20%
The World Bank estimated that global remittances would decrease by about 20 percent due to the Covid-19 influence, of which the East Asia and Pacific region would reduce by 13%, mainly due to the decline in cash flows from the US the largest source of remittances in this area.
Nguyen Tri Hieu said that the epidemic situation was still complicated in the world, so from then to the end of the year, the financial status of overseas Vietnamese would be strongly impacted. Therefore, the amount of remittance transferred to Vietnam this year would drop sharply by 10 percent to 20%.
The economic situation in the world was getting worse, according to the International Monetary Fund (IMF) report, the world economy this year would drop by five percent. The US gross domestic product (GDP) in Q2/2020 would decrease by 32.9 percent in a year, and the decrease was about nine percent if calculated from Q1 to Q2. Facing that situation, Vietnamese nationals living in the US had to suffer from a lot of influence, Hieu evaluated.
Also, this expert said that the reduction of foreign exchange would have an impact on Vietnam’s foreign exchange reserves, and it was difficult to reach the amount of $80 billion to $90 billion last year.
Currently, foreign reserves came from foreign capital into Vietnam, Official Development Assistance (ODA) loans, government loans, overseas remittances, and foreign institutional investors (FII). Therefore, a sharp decline in remittances would reduce foreign exchange reserves.
According to experts, the recovery of remittances would depend greatly on the prevention and control of Covid-19 epidemic of countries around the world. After the epidemic ended, countries’ economies were still severely affected. Therefore, in the next time, if the US and some other countries could control the outbreak, the business and income of the people also take at least one years to two years to recover, which depended on the level of the deep or shallow crisis of the economy.
Hieu forecasted that from then until the end of 2021, the epidemic would still have a strong impact on remittance, so it would not reach the revenue level of 2019. Remittance revenue might have recovered by 2022. In Q1, the remittance amount had not been affected by the disease. In Q2, it would start to have gradual impacts, but in Q3 and Q4, it would be affected more deeply. Meanwhile, Can Van Luc, chief economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said that the amount of remittance flowing to Vietnam in 2020 might decrease by 10 percent to 15 percent compared to 2019, but which might be about 15 percent to 17%, in case the epidemic kept going worse.
