The dong-dollar exchange rate will probably rise in the fourth quarter when there is an increase in demand for foreign currency for debt repayment and import of goods for the Tet holidays, says Pham Hong Hai, Managing Director of HSBC Bank Vietnam Ltd.
He was speaking on "The heat of exchange rate and interest rate" at a meeting of Ho Chi Minh City CEO Club at the Renaissance Riverside Hotel Saigon on Wednesday.
"There are fluctuations in the world's economy, several economies are in trouble with little growth while Vietnam has its own problems, making it hard for the exchange rate to be stable," he said
Hai said it is still hard to predict what will happen to the Eurozone. If Greece, Italy and Spain withdraw from the Eurozone as they have planned, it will affect the US dollar and indirectly influence the exchange rate in Vietnam.
However he also said "there would not be much change because the State Bank of Vietnam (SBV) has recently changed its way of management."
According to Hai, SBV previously acted when there was a 3-5 percent difference between the market price and that of the bank. Now, the central bank was reacting faster to even smaller changes.
It will immediately try to find out the major causes and deal with the problems by intervening in commercial banks or providing the market with a source of foreign currency. The problems will be solved quickly, making the market more stable, Hai said.
In addition to predicting the increase in exchange rate later this year, Hai also said people would make a move from Vietnamese dong to US dollars because of lower interest rates on dong deposits.
Another guest speaker at the meeting, economist Tran Du Lich, said the Government has kept too tight a grip on cash flow, making it hard for bad debts to be paid, which also affected economic growth.
Lich, who is a former member of the National Assembly of the 9th, 12th and 13th terms and former Director of Ho Chi Minh City Economic Institute, said, "The bad debts are like huge blood clots both in the arteries and veins of the body of the Vietnamese economy."
The policies which have been used have been like "too many antibiotics" for the "sick" economy. Better financial policies are needed to reduce such "blood clots", Lich said.
When asked if a major restructuring program can be implemented to help the Vietnamese economy grow better, Lich said it was like a major operation and cannot be done at the moment because the health indices are not as good as they should be.