Illustrative photo (Source: VNA) Hanoi (VNS/VNA) - The State Bank of Vietnam (SBV) bought 8.35 billionUSD from credit institutions between the beginning of this year and April17 to build up the nation’s foreign reserve.
According to report recently sent by the SBV to the NationalAssembly’s Economic Committee, SBV said the USD/VND exchange rate and theforeign exchange market was relatively stable while the liquidity of the marketwas also good in the first four months of the year.
With the additional purchases, it is estimated Vietnam’s foreign reserve hashit some 67.35 billion USD, double the level recorded three years ago.
The stability of the forex market has helped the SBV further build up thecountry’s foreign reserves over the past year. The central bank last year alsonet purchased 6 billion USD, according to SBV Governor Le Minh Hung.
Analysts from the Fitch Group’s Fitch Solutions Macro Research also forecastthat the ample foreign exchange reserves would help the SBV continue its courseof active intervention to ensure currency stability, which suggests the Dong islikely to see minimal volatility over the coming months.
Fitch also predicted Vietnam’s exchange market would remain stable this year,supported by the country’s robust foreign direct investment (FDI), a healthycurrent account surplus and by the central bank’s active intervention.
“The Dong will weaken slightly against the dollar to 23,700 VNDby the end of the year and average 23,440 VND per dollar over 2019, whichrepresents a 1.8 percent depreciation from the average in 2018,” the analystssaid in a recent report.
According to Fitch, the stability is thanks to the country’s robust FDI inflowsinto the manufacturing sector in 2019, made possible by improved diplomaticrelationships combined with the Government’s open-door trade policy, alongsidefavourable demographics such as the size of Vietnam’s educated and low-costlabour force.
Vietnam’s strong economic growth outlook will also continue to attract FDI inthe real estate sector as foreign developers look to capitalise on the rising affluenceof the population and the desire for physical expansion among businesses. Realestate businesses attracted total FDI of 6.6 billion USD in 2018, more thandoubling the 3.1 billion USD seen in 2017.
Fitch also forecast Vietnam’s account surplus would be around 2.1 percent ofGDP in 2019, which represents an expectation for the surplus to narrow slightlyfrom 2.2 percent in 2018.
Over the long term, Fitch forecast the Dong to weaken gradually againstthe dollar to due to higher inflation, but a relatively strong growth outlookis likely to put a floor under the depreciation of the currency.-VNS/VNA
VNA
