On July 2, the government held a conference with localities to evaluate the socio-economic situation in the first six months of the year and deploy the tasks for the last six months of 2020. At the conference, the Governor of the State Bank of Vietnam (SBV) shared that in the first six months, the VND exchange rate was stable within the range of 0.2-0.3%, and we had reached the highest level of foreign exchange reserves ever. Maintaining exchange rate stability has contributed significantly to stabilising inflation.
“This is also an important factor for credit rating agencies to maintain Vietnam’s credit rating, as well as maintain the confidence of investors, especially this is also a factor for us to attract investment, which contributes to recovering the economy in the near future after the pandemic,” the Governor noted.
Sharing the direction from now to the end of the year, Governor Le Minh Hung emphasized that the banking system and SBV affirmed the goal of operating monetary policy under the government’s direction to control and keep macro stability but the goal is to support economic growth. Therefore, the banking system will continue to commit to fully and promptly providing capital to the economy, will operate the exchange rate stably and be ready to take necessary measures to intervene in the market if there are excessive fluctuations leading to macro instability.
Many domestic macroeconomic reports also stated that SBV had many advantages to run a stable exchange rate this year. Vietnam Maritime Joint Stock Commercial Bank (MSB) forecasts that the exchange rate this year will only increase slightly to 23,351 dong per USD. The relatively stable exchange rate reflects investors’ belief in the health of Vietnam’s economy. Pressure to increase the exchange rate will take place at the end of the year when import demand is often high due to seasonal factors. However, when the Fed is expected to maintain monetary policy loosening to support economic growth, Vietnam’s trade surplus continues to improve, investors’ demand for VND increases, the VND/USD exchange rate will continue to be stable and adjust to increase in a range of one to two percent in 2021.
Meanwhile, BVSC Securities said that after the first half of 2019, VND only depreciated by 0.13 percent against the USD while other currencies in the affected area were relatively devalued like Indonesia’s IDR (depreciation of 2.55%); THB of Thailand (3.19%) and MYR of Malaysia (4.89%). The VND was stable against the USD in part because of the abundant foreign currency supply despite being negatively affected by the disease. The balance of import and export is currently in surplus of about $4 billion, and foreign currency revenue from FDI and remittances has not decreased too much in the first six months. Specifically, the disbursed FDI capital reached about $8.65 billion (down 4.9 percent over the same period).
