Illustrative image (Photo: thuongmai.vn)
 
Hanoi (VNA) – The fluctuation of foreign exchange in the first quarter was due to a sharp rising import value, according to the National Financial Supervisory Commission (NFSC).

Statistics from the General Department of Customs indicated that the country’s trade deficit in the first quarter of this year was roughly 1.9 billion USD, compared with a trade surplus of roughly 1 billion USD in the same period in 2016. The trade deficit in Q1 of  2017 was equal to 4.4 percent of the country’s total export revenue in the period.

Experts said that the main reason for the rising import value was the strong increase in the demand for imported machinery and equipment, due to stronger economic growth prospects in 2017.

The NFSC, the Government’s financial watchdog, said that after declining in the first month of the year, the VND/USD exchange rate at commercial banks has risen significantly since mid-February and often approached the cap listed by the central bank. By March 20, the dollar was quoted at 22,820 VND per USD, up roughly 0.13 percent against early this year.

In the unofficial market, the dollar also accelerated to hit 23,000 VND per USD in the first half of February. It has cooled down since and is now close with that listed by commercial banks.

The central bank’s reference exchange rate by March 20 was also adjusted up 0.47 percent, the NFSC said.

The NFSC also forecast that the country’s foreign currency supply source in the entire 2017 could be at a disadvantage compared with last year due to the trade deficit. Last year, the country’s trade surplus hit an 11-year-high of more than 2.52 billion USD. However, a high trade deficit was forecast for 2017. The government has planned a trade deficit that was to equal roughly 3.5 percent of the country’s total export value.

The country’s foreign currency supply source this year was also forecast to reduce in the wake of a restriction of official development assistance (ODA) sources from July this year. According to released itineraries, the World Bank is due to stop the preferential ODA sources for Vietnam from July this year.

NFSC also noted the volatility of the yuan and stated that a sharp devaluation in the currency would make a big negative impact on Vietnam’s economy due to the country’s rising trade deficit with China. The trade deficit rose to 28 billion USD in 2016 from 23.7 billion USD in 2013.

If compared with the GDP, Vietnam’s trade deficit with China was 14 percent, which was much higher than the 2 percent trade deficit of the United States (US) and China, the NFSC noted.

The committee forecast that the US Federal Reserves (Fed)’s interest rate hike has not caused any pressure on the foreign exchange in 2017 as the interest rate of dong deposits are still more attractive than the dollar deposits.

According to the central bank, interest rate averages between 4.8 percent and 5.4 percent per year for dong deposits below six months, 5.6 percent to 6.7 percent per year for 6- to 12-month dong deposits and 6.7 percent to 7.4 percent per year for dong deposits above 12 months. The interest rate for dollar deposits is zero percent.-VNA