Vietnam faces exchange risks : Standard Chartered

Although Vietnam has been positive in maintain economic growth and macro stability, the exchange rate risks remain concerns for the time being, the Standard Chartered bank said in its recent report.

Although Vietnam has been positive in maintain economic growth and macro stability, the exchange rate risks remain concerns for the time being, the Standard Chartered bank said in its recent report.

Standard Chartered forecasted that the dong, the country’s currency, will continued to be weakened against dollar to VND19,900 by the end of this year and to VND20,800 in 2011. “The coming dong weakening will help Vietnam to boost export and curb the trade deficit gap,” said Standard Chartered.

Timing for the third weakening of the year will depend on the speed of price increases on goods and services, said Standard Chartered.

The lender added that forecasted dollar prices for 2010 were down VND100 from those in its July report, released before the 2.09% dong weakening, while those for 2011 were up VND1,000 to VND20,800, reflecting the lender’s worries about the speed of dong weakening in coming16 months.

The lender was concerned that dollar price hike is expected to hider the lenders’effort in cutting interest rates, adding that slower credit growth may not meet the mounting dollar demand of enterprises in the year-end peak season.

However, the forecasted dong weakening is expected to hardly affect inflation in the coming time. A 10% weakening could only boost up short-term inflation by 1.35% , which was proved by the econometrics model and observation for years, said Le Xuan Nghia, Vice Chairman of Vietnam’s National Financial Supervision Commission.

Standard Chartered also forecasted the benchmark interest rate to rise to 10% in 2011 from 8% in 2010.

Earlier this year, the SBV has made two significant adjustments to the domestic currency, a 5.4% weakening in November 2009 and another 2.04% weakening in August 2010. Thus, dong will be devaluated by 8.5% by the end of this year according to Standard Chartered’s forecast, lower than its earlier forecasted dong devaluation of 11.5%.

However, Standard Chartered’s experts keep an optimistic outlook for Vietnam economy in the rest of the year, expecting inflation to be well-controlled and trade deficit to be stable. – Stoxplus.com

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial

Posted by VBN on Sep 9 2010. 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