Foreign tourists visit Hue Imperial Citadel in the central province of Thua Thien-Hue (Photo: VNA) Hanoi (VNS/VNA) - Vietnam’s current account surplus could narrowto 3.7 percent in 2020 from 4.9 percent last year due to the impacts of theCOVID-19 pandemic, according to Fitch Solutions.
In a recent report on Vietnam’s outlook, the UK-based financial informationservices provider said this would mainly be due to the drop in tourism causinga sharp fall in the services trade balance.
"We expect the collapse in tourism as a result of COVID-19 induced travelrestrictions to cripple services exports," Fitch said in a statement.
"Indeed, following border closures, tourist arrivals have fallensignificantly from generally above a million every month to below 30,000 fromApril to July."
Meanwhile, Fitch said, the primary income deficit was likely to narrow slightlyon the back of Vietnam’s economic growth outperformance relative to the globaleconomy, which will support profits for foreign investors and by extension, theincome paid abroad.
The external goods trade balance is likely to remain fairly stable, consideringthe high composition of intermediate goods in Vietnam’s imports for use inexport manufacturing, which see both exports and imports track each otherclosely.
Fitch analysts said in their report: “We expect the positive goods tradebalance to offset the sum of the services trade deficit and net primary incomepayments,” adding that COVID-19 grants from multilateral organisations such asthe World Bank and other transfers from overseas persons and entities shouldkeep Vietnam’s secondary income balance positive as it has been since 2012.
From a savings-investment perspective, Fitch said Vietnam’s negativesavings-investment gap flipped positive since 2011, correspondingly seeing thecurrent account post surpluses thereafter.
It added: “Since then Vietnam has been a net direct investor overseas and weexpect this current account surplus to continue but narrow over the comingdecade.
"This is because we believe that the Vietnamese authorities’ effort toreduce deposit interest rates to provide room for banks to lower lending ratesaccordingly to support economic activity amid the COVID-19 induced economicshock should also disincentivise savings in favour of investment, andaccordingly see a rise in the investment rate. Risks to Vietnam’s externalfinancing position will remain low over the coming decade.”
Fitch said it saw limited risks from Vietnam’s growing external debt burden,explaining given that more than 80 percent of the country’s total external debtis in the form of long-term debt, it didn’t see major risks stemming from theneed for high debt repayments over the short term, especially considering thelow interest rate environment the world has been in for the past decade./.
In a recent report on Vietnam’s outlook, the UK-based financial informationservices provider said this would mainly be due to the drop in tourism causinga sharp fall in the services trade balance.
"We expect the collapse in tourism as a result of COVID-19 induced travelrestrictions to cripple services exports," Fitch said in a statement.
"Indeed, following border closures, tourist arrivals have fallensignificantly from generally above a million every month to below 30,000 fromApril to July."
Meanwhile, Fitch said, the primary income deficit was likely to narrow slightlyon the back of Vietnam’s economic growth outperformance relative to the globaleconomy, which will support profits for foreign investors and by extension, theincome paid abroad.
The external goods trade balance is likely to remain fairly stable, consideringthe high composition of intermediate goods in Vietnam’s imports for use inexport manufacturing, which see both exports and imports track each otherclosely.
Fitch analysts said in their report: “We expect the positive goods tradebalance to offset the sum of the services trade deficit and net primary incomepayments,” adding that COVID-19 grants from multilateral organisations such asthe World Bank and other transfers from overseas persons and entities shouldkeep Vietnam’s secondary income balance positive as it has been since 2012.
From a savings-investment perspective, Fitch said Vietnam’s negativesavings-investment gap flipped positive since 2011, correspondingly seeing thecurrent account post surpluses thereafter.
It added: “Since then Vietnam has been a net direct investor overseas and weexpect this current account surplus to continue but narrow over the comingdecade.
"This is because we believe that the Vietnamese authorities’ effort toreduce deposit interest rates to provide room for banks to lower lending ratesaccordingly to support economic activity amid the COVID-19 induced economicshock should also disincentivise savings in favour of investment, andaccordingly see a rise in the investment rate. Risks to Vietnam’s externalfinancing position will remain low over the coming decade.”
Fitch said it saw limited risks from Vietnam’s growing external debt burden,explaining given that more than 80 percent of the country’s total external debtis in the form of long-term debt, it didn’t see major risks stemming from theneed for high debt repayments over the short term, especially considering thelow interest rate environment the world has been in for the past decade./.
VNA
