Experts are optimistic that inflationary pressure will recede in the coming months. (Photo: VietnamPlus) Hanoi (VNA) – The likelihood of a soft landing of the US economy and the possibility that the Federal Reserve (Fed) will begin cutting interest rates which may drive the USD downward in 2024 will ease the inflationary pressure on the Vietnamese economy, according to experts.
As the economy is projected to be on a slow recovery in 2024, central banks across the globe will prepare to reverse course on interest rates with a loosened monetary policy, helping ease the pressure on Vietnam’s foreign exchange rate policy.
Fed already signaled three interest rate cuts in 2024, with the first in March.
Dr. Nguyen Duc Do, Deputy Director of the Institute of Economics and Finance under the Academy of Finance, said that the inflationary pressure will not be strong in 2024 since the US currency is on a downward trend.
Sharing the same viewpoint, economist Ngo Tri Long said the US economy’s soft landing and Fed’s interest rate cuts in the end of Quarter 1 will drive the USD and the USD/VND exchange rate down, thus easing the inflationary pressure on the Vietnamese economy.
Last year, foreign investors funnel nearly 36.61 billion USD into Vietnam. (Photo: VietnamPlus) Country Head of Global markets at United Overseas Bank Limited Vietnam (UOB Vietnam) Dinh Duc Quang said like many other Asian currencies, it appears that the bulk of the VND sell-off is over, with the USD/VND exchange rate retracing lower after reaching UOB’s forecast of 23,500 in Quarter 4 of 2023 following Fed’s signal of a possible end to its interest rate increase cycle.
Although the VND followed the broad Asia forex recovery trend, its gains could be limited by a slow economic recovery this year, he said, adding the exchange rate will be 24,000 VND in Quarter 1, 23,800 VND in Quarter 2, 23,600 VND in Quarter 3, and 23,500 VND in Quarter 4.
According to Governor of the State Bank of Vietnam Nguyen Thi Hong, the VND was among the most stable currencies in the region and the world, losing about only 2.9% against the USD in 2023.
Last year, there was a time that the USD/VND rate was on a strong rise due to the speculation of USD. However, the State Bank of Vietnam issued a large amount of treasury bills worth more than 360 trillion VND (14.66 billion USD) that drove the interest rates in the interbank market up, contributing to reducing the USD/VND interest rate differences to 2-3% from the previous 5%.
Robust trade and investment activities as well as abundant supply of foreign currency helped cool down the exchange rate of the VND against the USD, curbing the pressure on the VND devaluation.
The central bank’s Ho Chi Minh City branch said remittances to the southern economic hub totalled 9 billion USD, up 35% year-on-year. Meanwhile, the flow of remittances to the whole country could reach 14-15 billion USD.
The VND is among the most stable currencies in the region and the world. (Photo: VietnamPlus) Statistics from the Ministry of Planning and Investment’s Foreign Trade Agency showed that as of December 20, 2023, foreign investors registered nearly 36.61 billion USD in Vietnam, a year-on-year surge of 32.1%. Some 23.18 billion USD was disbursed in the year, up 3.5% from 2022, hitting an all-time high./.
