Vienamese dong intrinsically not weak: WB’s former expert

In the seminar on foreign exchange management taken place in Hanoi on April 18, Michel Henry Bouchet, a former financial manager of the World Bank (WB), said dong is actually not weak.

According to Bouchet, the local greenback has gone up in the 2006-2010 stage. But now, the local currency is weakened by the pressure of inflation, expected at 13 percent this year, and the high trade deficit ($9 billion). And if the FDI inflow into Vietnam shows slowdown, it will increase more pressure on the dong. Therefore, Bouchet said that the dong/US dollar forex rate is not technical issues and regulated by the State Bank of Vietnam (SBV), but it is a psychological problem. Residents and investors should have confidence in long-term prospects of Vietnam.

Bouchet said that the Vietnamese government has made some good measures such as applying the ceiling saving rates of foreign currencies at 3 percent per annum, to help people more interested in the local banknote with the deposit rates of 14 percent per year. But that is not enough. Vietnam needs to inhibit the “overheating” growth during the past five years. The current priority is for stable and sustainable GDP growth and development together with other factors such as good education, governance and infrastructure in the long term. The Vietnam’s GDP growth goal is not necessarily 7, 8 or 9 percent but it can only be 5 percent per year without inflation at 9 percent or 12 percent. Accordingly, curbing inflation should be considered the first priority, he advised.

Additionally, public spending reduction is no longer economic choice that is political choice, so the government should review the investment list in the next five years, to give a high priority on Vietnam’s long-term economic prospects. Also according to Bouchet, real estate sector should not be included in the priority list, instead of education, infrastructure, industry, tourism and retail. – Vietbiz24

Tags: vietnam dong

Posted by VBN on Apr 20 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry