Photo: Diep Duc Minh
The Vietnamese government is likely to be hard-pressed to keep its promise of preventing the dong from sliding more than 2 percent against the dollar in the rest of this year, the National Financial Supervisory Commission has warned in its latest report.
The exchange rate will see "certain influences" from the increased demand for importing equipment and raw materials due to the rise in production activities at the year-end, especially since the economy is recovering, according to the commission.
Moreover, the fact that the US Federal Reserve is likely to increase interest rates anytime from now, thus strengthening the dollar, would also affect the exchange rate in Vietnam, it said.
So far this year the State Bank of Vietnam has depreciated the dong by a total of 2 percent on two occasions, saying it needed to reduce the country's trade deficit and help stabilize the exchange rate.
The bank's reference rate was VND21,820 a dollar Tuesday.
The commission said in its report that Vietnam's FX market was stable in the first seven months with the rate ranging between VND21,805-VND21,815.
It attributed the stability to the central bank's management and the country's improved trade balance -- deficit of $140 million in June against an earlier estimate of $700 million.
The situation was also thanks to a rise in foreign direct investment -- up 9.6 percent year-on-year in H1 to $6.3 billion -- while remittances were expected to rise from $12 billion last year to $13-14 billion this year, it said.
Credit grows, bond lags
As of July 20 bank credit growth was 7.32 percent, twice the rate a year earlier, the commission reported.
It also forecast the banking system to achieve its goal of bringing the bad debt ratio to below 3 percent by October 1.
The ratio reduced from 3.81 percent in March to 3.15 percent in May, it said.
Meanwhile, government bond sales have been underperforming with only VND86.1 trillion ($3.88 billion) worth of bonds, or 34.4 percent of the year’s target, being issued in the first seven months, it said.
The government’s revenues were lower than estimated in H1 due to the steep decline in crude oil prices since last year, it said.
Crude oil revenues were down 32.5 percent year on year.
However, the commission expressed its belief that the government would achieve its revenue targets, mostly from taxes and fees.
It also forecast the gross domestic product to grow at 6.4 percent over the first nine months and 6.5 percent over the whole year.