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NEWS UPDATES 13 February 2010

Thailand monitors impact of Vietnamese dong devaluation

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Thai Prime Minister Abhisit Vejjajiva has said that the recent devaluation of Vietnamese currency may have a slight impact on Thai exports, reported state news agency TNA.

Abhisit said Friday he had ordered concerned government agencies to closely monitor the latest devaluation of the Vietnamese dong.

Thailand's Ministry of Finance reportedly prepared an analysis on the impact on the Thai economy after the Vietnamese currency devaluation which said that the impact would be “limited” because trade and investment between the two neighbouring countries are still small.

Also, the devaluation would not affect Thailand’s exports competitiveness because major goods exported by the two countries differ, according to the report. Vietnam is likely to face rising production costs because the devaluation would lower its domestic inflation.

However, concerned Thai government agencies will monitor movements of regional currencies for the short-term to prevent Thailand from losing the advantage it currenly enjoys, which could impact rice and computers, which are major goods exported by both Thailand and Vietnam. The monitoring will also help prevent the transfer of capital investment.

For the medium-term, the analysis suggested that Thailand should concentrate on exporting goods to several countries instead of  focusing on any particular country, stimulate local spending and depend less on exports.

It suggested that the government should promote research and development aimed at boosting manufacturing output and to also improve human efficiency.

On Thursday the State Bank of Vietnam (SBV), Vietnam's central bank, devalued the dong  by 3.4 per cent against the US dollar for the second time in three months, saying that the decision was taken to balance supply and demand, and increase flows in the foreign exchange market while contributing to controlling the trade deficit and stabilising the macroeconomy.

Vietnam’s trade deficit reportedly reached $12.2 billion last year. In November the Vietnamese central bank effectively devalued the dong by 5.4 percent.


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