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VIETNAM - VND expected to remain stable

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Post by lexie Wed Feb 08, 2012 2:32 pm

February 8, 2012

VND expected to remain stable

The exchange rate will be stable this year given ample supply of foreign currencies, economic experts have said. They said optimistic signs on the exchange rate that emerged in late 2011 would continue this year.


According to economist Le Dang Doanh, after the Government’s meeting that the country’s GDP growth for this year would be “very good” if it was 5 percent rather than 6 percent given the euro zone debt crisis and difficulties in the US as well as internal macro-economic woes in this country.


Export this year will be adversely affected by continued economic woes, leading to less material import and a lower trade deficit - some VND10 billion, Vu Dinh Anh said, adding this would drag down demand for hard currency.


Export this year will be adversely affected by continued economic woes, leading to less material import and a lower trade deficit – some VND 100 billion, Anh said adding this would drag down demand for hard currency.


The US dollar will maintain its position as a strong currency, and may appreciate against other currencies due to the euro zone debt crisis. If inflation was curbed below 10 percent this year, the VN dong might fall 2 percent -3 percent.


Regarding foreign investment funds, which strongly support the balance of trade, Anh is uncertain about a surge in foreign indirect investment (FII). Still, he said investors might not withdraw capital from Vietnam because this would not help resolve their problems overseas.


As for foreign direct investment (FDI), he believed disbursements would continue to rise this year, as the capital registered in 2009 and 2010 was hefty and delays in implementation were reduced.


He noted an investment shift to the sectors where Vietnam has advantages and value-added goods would have a positive disbursement rate in the coming time.


Given the more attractive interest rates for dong than those for foreign currencies and the stable exchange rate in recent months, Anh expected the public would regain confidence in dong.


He said the pressure to pay debts in foreign currencies lessened last year, with the year’s foreign credit growth of 18.7 percent against 48.45 percent in 2010.


In addition, the central bank governor has promised to keep the exchange rate rise within 2 percent - 3 percent, so the stable rate will make it possible for enterprises to borrow foreign currencies and then convert it into dong.


The exchange rate will be guaranteed until the end of the third quarter.


The demand for foreign currencies for import has declined given continued economic problems.


He said the biggest pressure on inflation this year would be power and fuel prices.


January inflation has recently been announced at 1 percent. If inflation also rose slightly in March and April, it would be possible to keep the year’s inflation below 10 percent Anh predicted.



http://www.vietfinancenews.com/2012/02/vnd-expected-to-remain-stable.html#more



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