Vietnam’s remittances and FDI to boost 2008 forex surplus

August 12, 2008

Vietnam’s remittances and FDI to boost 2008 forex surplus
Vietnam’s central bank on Monday predicted higher remittances and the inflow of foreign direct investment will result in a surplus in foreign currency supply and a stable exchange rate against US dollar this year, reported Reuter.

The country’s Foreign Investment Agency had forecast disbursement for foreign direct investment projects this year to jump nearly 38 percent from 2007 to a record $11 billion. New pledges would more than double to $50 billion compared with last year. Meanwhile, remittances from Vietnamese working overseas have also been forecast to reach a record $8 billion this year.

“The State Bank will continue to manage the exchange rate with flexibility based on the market situation and maintain relative stability of the rates in order to promote exports and limit imports,” Governor Nguyen Van Giau was quoted by Reuters as saying on a government’s website.

Giau said there were sufficient foreign exchange funds to cover a $20 billion trade deficit expected in 2008.

Vietnam’s trade account has been under massive pressure this year as raw material prices soared but the trade gap has been narrowing after the government capped imports, especially consumer products such as cars and mobile handsets.

Still, January-to-July’s accumulated deficit was double the same period last year at $15 billion, government data showed.

On the unofficial markets, the dong strengthened to a 2-month high on Monday at about 16,450 dong per dollar, in line with the interbank market rates and up from 19,000 dong in June as demand to hoard the currency has weakened, dealers said.

“Many investors are putting their money back into the stock markets, real estate to take advantage of low prices so the dollar is not a favourite investment now,” a Hanoi dealer said.

Meanwhile, bankers said on Monday their banks had cut annual interest rates on dollar deposits to around 6 percent this week from 8.5 percent in June.

The central bank said in a market review on Monday it received little interest from commercial banks to buy dollars last week.