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Vietnam’s weekly financial - monetary situation (Week 43 – 2020)

Vietnam’s weekly financial - monetary situation (Week 43 – 2020)

Thursday 29, 10 2020

Vietnam’s macro-economic overview

In the last months of 2020, Vietnam economic outlook has been believed to be more positive. In the latest report on the global economy by the International Monetary Fund (IMF), the GDP of Vietnam along with China, which are emerging and developing economies, will enjoy a positive growth in 2020 with rate at 1.6% forecasted by the IMF. The overall GDP growth rate for emerging and developing economies in the world is at -3.3%. The IMF also forecasts that Vietnam will surpass Singapore and Malaysia to hold the 4th position in the ASEAN region in terms of gross domestic product. This result largely comes from Vietnam's efforts to control the epidemic, and affirms its resilience during and after the Covid-19 pandemic. However, there is a possibility that the pandemic will break out again in Vietnam. 
GDP of Vietnam
In terms of trade, imports and exports continued to record positive developments in October 2020 with both exports and imports increasing over the same period last year. Accordingly, October’s exports were estimated to increase by 7.9% to 27.2 billion USD, and import increased by 9.5% to 24.5 billion USD. The total export turnover in the first 10 months of 2020 is estimated at 228.8 billion USD, an increase of 4.5%; and import turnover reached 210.6 billion USD, an increase of 0.4% over the same period last year. Vietnam enjoyed a trade of 18.2 billion USD, which doubled the surplus in the first 10 months of 2019. It is forecasted that Vietnam's export turnover in the fourth quarter of 2020 will reach about 75 - 78 billion USD.
 imports and exports Vietnam

Weekly financial - monetary situation and forecasts

Exchange rate

In the past week, the USD / VND exchange rate remained stable in the official market but decreased in the unofficial market. At VCB, compared to the previous week, the exchange rate of USD / VND stayed unchanged, at 23,060 VND / USD (buying side) and 23,270 VND / USD (selling side). Compared to the beginning of 2020, the USD / VND exchange rate on the selling side has increased by 40 VND / USD (equivalent to an increase of 0.17%).

In the unofficial market, the USD / VND exchange rate has decreased by 20 VND / USD on both sides to 23,170 VND / USD (buying side) and to 23,200 VND / USD (selling side).

At the State Bank of Vietnam, the USD / VND exchange rate was stable at 23,175 VND / USD, which is 700 VND / USD lower than the ceiling price. Compared to the previous week, the USD exchange rate on the selling side decreased by 13VND / USD to 23,825 VND / USD and was 50 VND / USD lower than the ceiling price.
Exchange rate Vietnam USD
Meanwhile, the central exchanged rate announced by the State Bank applicable to October 22, 2020 was 23,180 VND / USD, down 12 VND / USD (equivalent to a reduction of 0.05%) compared to the rate announced the previous week. Since early 2020, the central exchanged rate has been adjusted to increase by 7 VND / USD (equivalent to an increase of 0.03%). 

In the context of favorable exchange rates, the State Bank has purchased an additional 1 billion USD for foreign exchange reserves, raising the foreign exchange reserve to 93 billion USD (at the end of 2019, foreign exchange reserves were about 80 billion USD). It is expected that by the end of this year, Vietnam’s foreign exchange reserves will have reached 100 billion USD.

According to experts, Vietnam needs to raise its foreign exchange reserves to about 6 months of imports, reaching 150 billion USD within the next 12-18 months.

Interest rate

The average interbank interest rate has remained low for about 4 recent months. It is forecasted that interest rate may decrease further if there are more adverse developments.

Last week, in the open market, there were no new transactions. The interest rate on the interbank market, though slightly increased compared to the previous week, was still at low level. On 20/10/2020, the average interbank interest rate for the overnight term was 0.11% / year, 1 week was 0.23% / year, 2 weeks was 0.21% / year. 

Although the Covid-19 pandemic has basically been controlled and it is the last quarter of the year, which is usually the peak season, the ability to absorb capital of the economy is still quite low. This makes interest rates remain low in the near future or can be further reduced by 0.1% -0.3% / year if the pandemic becomes complicated.
It is forecasted that deposit
and lending interest rates could drop by 0.25-0.5% / year in the fourth quarter of 2020. It should be noted that short-term deposit rates may fall much more than long-term rates.

In addition to the reserve factor, buying USD means pumping VND into the market, which is one of the ways to support capital flows for the economy, thereby causing interest rates to stay in low levels or decrease.

Gold price

The world gold price increased because the USD dropped to a 7-week low and the US stock market fell. Meanwhile, the Covid-19 epidemic is still complicated, and the number of infected people is still increasing in America, Europe and South Africa.
Gold price
However, on the world market, investors have been cautious in recent days. The largest gold investment funds in the world SPDR Gold Shares and some other investment funds only bought a total of 4 tons of gold, after selling more than 9.9 tons in the previous session.

At the end of the week, spot gold price was 1,921 USD / oz, which was an increase of 28 USD / oz (equivalent to an increase of 1.5%) compared to last week. Gold futures price in December 2020 on Comex New York was 1,924 USD / oz, up 24 USD / oz (equivalent to an increase of 01.3%) compared to the previous week. On the Kitco trading exchange, spot gold prices were at 1,923.80 - 1,924.80 USD / oz, up 21.9 USD / oz (equivalent to an increase of 1.1%) compared to the previous week.

World gold price is about 2.0 million VND / tael lower than the domestic gold price.
Domestically, the price of gold has increased. Specifically, in Hanoi, SJC gold bought in and sold out price was 55.95 and 56.47 million dong / tael, respectively.

Source: Ministry of Industry and Trade
Compiled by VietnamCredit

Vietnam Economy

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