Remittances to Vietnam forecast to fall due to the pandemic (Photo: Contributor/VietnamPlus) Hanoi (VNA) - Remittance is considered one of the important resources to support the Vietnamese economy. The supply of foreign currencies from remittances contributes to improving overall payment balance of the economy as well as helps ease dependence on foreign capital flows.
However, a report recently released by the World Bank forecast that remittances to Vietnam will decrease by over 7 percent to 15.7 billion USD this year, or 5.8 percent of the gross domestic product. If it becomes true, it will be the first time remittances to Vietnam will fall significantly since 2017.
Falling remittances
The forecast is in the general trend of the world. The report also predicted that global remittances will decrease by 14 percent from 2019 due to the pandemic and economic crisis. In low and average-income countries, it is forecast to fall by 7 percent to 508 billion USD this year and 7.5 percent to 470 billion USD next year.
In the Asian Development Outlook, the Asian Development Bank (ADB) said economic recession will threaten security and occupational welfare of over 91 million migrants from the Asia-Pacific.
Therefore, remittances to Asia are likely to fall to 54.3 billion USD this year, or about 20 percent of the current level. The ADB’s report also showed that Vietnam, Indonesia and the Philippines post the strongest decrease in remittances this year.
Deputy Director of the Ho Minh City branch of the State Bank of Vietnam (SBV) Nguyen Hoang Minh attributed the decrease to the pandemic that affected jobs and income of workers. Overseas Vietnamese also face such difficulties, resulting in limited remittances to relatives at home.
Another cause is weak economic growth and decrease in employment in high-income nations in the US and European nations. Additionally, slump in oil prices also affected countries in the Gulf Cooperation Council and Russia – major sources of remittances sent to East Asia, Southeast Asia and Central Asia, leading to a fall in income of migrant workers.
According to the SBV’s HCM City branch, remittances to the southern hub had only reached nearly 3 billion USD as of the late July, down 1.2 percent year-on-year.
However, remittances rebounded after the pandemic has been under control in several nations. In October alone, 500 million USD worth of remittances were sent to credit institutions in Ho Chi Minh City.
Remittances likely to rebound if pandemic is under control
Financial-banking expert Nguyen Tri Hieu said remittances in 2020 will be much lower than in 2019.
The sum of remittances is only relative because they come from official and unofficial channels. The official figure will be announced by the SBV or financial organisations.
Meanwhile, chief economist at the Bank for Investment and Development of Vietnam (BIDV) Dr. Can Van Luc said remittances to Vietnam will fall by 10-15 percent from 2019, or around 15-17 percent if the pandemic gets worse.
Minh forecast with optimism that during the final three months of this year, remittances will gradually rebound once countries curb the spread of the pandemic.
In recent years, the exchange rate between Vietnamese dong and US dollar has been stable so that recipients tend to sell their remittances to credit institutions.
Several banks use remittance payment technology and offer service to change foreign currencies to Vietnamese dong for saving at high interest rate.
Over the past years, remittances have been not only in the form of saving but also in securities, real estate, share purchase or business establishment.
Moreover, banks also enhance the use of technology and offer promotions to draw more customers. For example, Sacombank cooperated with partners in the US, Australia, Europe, Japan and Taiwan (China), and especially adopted API technology allowing quick payment round the clock. Accordingly, recipients could receive remittances no later than one minute.
From November 16, customers at Vietcombank receiving remittances worth over 1,000 USD via its XOOM channel will have a chance to receive 100,000 VND in their accounts and other attractive gifts such as Bluetooth JBL Charge 3 speaker./.
