Vietnam expected to run $1bln balance of payment surplus in 2011

Vietnam is expected to run a balance of payment (BOP) surplus of $1 billion this year, first surplus since 2008, Le Xuan Nghia, vice chairman of Vietnam’s National Financial Supervision Commission (NFSC) forecast.

Vietnam is expected to run a balance of payment (BOP) surplus of $1 billion this year after suffering a deficit of $9 billion in 2009 and $3.06 billion in 2010, Nghia, said in the workshop “monetary and fiscal policy & developing Vietnam’s financial market” held by the University of Economics & Law on April 23.

Nghia analyzed that out of$ 8 billion inbound overseas remittance last year, $4.3 billion was sent by Vietnamese working overseas, $3 billion stable sources and only $1 million carry trade. Of these $1 billion carry trade, it is unlikely that they will be withdrawn due to lower local dollar interest rate because the rate is still lower in other countries.

NFSC forecasted overseas remittance from Vietnamese working overseas will declined only $200 million this year to $4.1 billion due to over the return of 10,000 Vietnamese workers from Libya

Nghia is also positive that foreign exchange rate will not fluctuate much this year against a basket of 19 hard currencies as global US dollar is declining.

Sharing the same view, Vo Tri Thanh, vice director of Central Institute for Economic Management (CIEM) cited many foreign institutions’ forecast of dong devaluation under 3% from current level.

Opposite to Nghia forecast, Pham Do Chi, an economist forecast Vietnam to suffer $3 billion BOP deficit this year arguing the falling of overseas remittance due to dollar deposit rate cap.

Chi forecast overseas remittance fell to $ 5 billion while trade deficit at $12 billion.

Hoang Cong Gia Khanh, a professor at the University of Economics & Law is also cautious with forex stability and sees the current forex stability just “short-term”. Khanh thinks Vietnam should be more transparent in forex navigation to escape two prices mechanism. – Stoxplus.com

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