Exchange rate pressure seen from the overall balance outlook

In the second half of 2023, although the pressure on the VND/USD exchange rate is not as strong as the end of 2022, it has also escalated from August to October 2023. The main reason is due to the large interest rate difference between VND and USD, because the State Bank of Vietnam implemented a loosening monetary policy, continuously lowering operating interest rates right from the first quarter of 2023 to support businesses and economy. Meanwhile, around the world, major central banks still raise interest rates to fight inflation and anchor interest rates at high levels.

During the period of escalating exchange rate pressure, the State Bank flexibly operated the open market, absorbing excess VND from the system through issuing 28-day State Bank bills, in order to narrow the gap. Interest rate difference between VND and USD in the interbank market.

To date, many factors show that exchange rate pressure has been relieved. Outside, major central banks have reached the final leg of the interest rate hike cycle. USD Index dropped sharply. Domestically, the internal problems of the economy have changed positively. In particular, the balance of payments (related capital and major impact on exchange rates) is forecast to improve positively in the near future.

The overall balance deficit or surplus is closely related to the exchange rate issue. Looking back at 2022, the overall balance is negative to 22.6 billion USD, with a deficit of 15.6 billion USD in the third quarter of 2022 alone, so the exchange rate is extremely tense.

Meanwhile, in the period of 2019 and 2020, the exchange rate increase was not due to problems from the overall balance (surplus of 16.7 billion USD and 14.4 billion USD, respectively), so it was alleviated quite quickly.


The International Monetary Fund (IMF) forecasts that Vietnam’s overall balance in 2023 will have a surplus of 12 billion USD; in 2024, it will decrease slightly to 11.7 billion USD.

To date, factors supporting the overall balance include a trade surplus, positive FDI disbursement, and stable remittances.

According to data from the General Statistics Office, in the first 11 months of 2023, Vietnam’s total import-export turnover of goods reached 619.1 billion USD, down 8.3% over the same period last year (YoY). Of which, export turnover reached 322.5 billion USD, down 5.9%; Import turnover reached 296.6 billion USD, down 10.7%. The trade balance of goods in 11 months is estimated to have a trade surplus of 25.8 billion USD (the same period last year had a trade surplus of 10.3 billion USD).

The US continues to be Vietnam’s largest export market with an estimated turnover of 88 billion USD, followed by China (56 billion USD), EU (39.9 billion USD), ASEAN (29.4 billion USD) , South Korea (21.5 billion USD), Japan (21.2 billion USD). On the contrary, China is Vietnam’s largest import market with an estimated turnover of 99.6 billion USD.

In the 5 years 2018 – 2022, Vietnam’s average import-export growth rate is +11.62% YoY and import is +11.27% YoY. During the domestic and international shock period of Covid – 19, import and export declined but still grew positively. However, by 2023, the world’s mainstream monetary policy is leaning towards tightening, led by the Fed, causing demand for world goods in general, or more specifically, Vietnam’s main export markets. South (United States, China and Europe) declined, leading to a decline in Vietnam’s export growth to these markets, or even negative growth.

However, exports have recovered since October 2023, positively impacting Vietnam’s trade balance. In September 2023, the IMF forecast that Vietnam’s trade balance would have a surplus of 25.4 billion USD in 2023 (actually 11 months had a surplus of 25.8 billion USD); By 2024, the trade surplus could reach 27.9 billion USD.

However, some domestic analysis units have made more optimistic forecasts about the trade balance prospects in 2023 and 2024. Specifically, BIDV Securities (BSC) said that the trade surplus in 2023 could reach 28.6 billion USD and in 2024 it will be 29.1 billion USD.

The biggest hope is placed on the US market. Exports to the US will recover when: (1) the Fed begins to loosen monetary policy; (2) Inventories in the US have tended to grow slowly in recent months; (3) Vietnam has upgraded its relationship to a comprehensive strategic partnership with the US. In a 2024 macro outlook report published at the end of November 2023, FiinGroup expected exports in 2024 to increase by 10.4% and imports to increase by 7.8%.


Besides the trade balance, the capital account also has a positive outlook thanks to FDI disbursement maintaining growth.

After a sharp increase in the previous 4 months, registered FDI capital flows showed signs of slowing down, reaching 2.3 billion USD in November 2023, down 57% compared to October 2023 and down 5.6% over the same period. period of 2022, due to a decrease in newly registered capital from main markets such as Singapore, Korea, Japan, Hong Kong, and Taiwan. In contrast, adjusted registered FDI capital in November 2023 (accounting for 50.4% of total registered FDI capital) increased sharply (up 519% compared to October 2023 and up 43% over the same period last year).

In terms of sectors and fields, the processing and manufacturing industry continues to lead in attracting capital (accounting for 70% of total registered FDI capital in November), but registered capital in the real estate business sector increased dramatically. , an increase of 270% compared to October 2023 and an increase of 133% compared to the same period in 2022.

Regarding disbursement, disbursed FDI capital in November 2023 reached 2.25 billion USD, up 7.8% compared to October 2023 and up 7.4% over the same period in 2022. Accumulated for the first 11 months of 2023, Registered FDI capital in Vietnam reached 22.9 billion USD, an increase of 8.7% over the same period last year, while disbursed FDI capital had a lower increase (up 2.9%), reaching 20.3 billion USD. USD – the highest level for the same period since 2017 until now.

The IMF forecasts that FDI disbursement in Vietnam will grow by about 5.1% in 2024, while indirect investment (FPI) flows remain positive but at a low level because USD interest rates have not cooled down. Foreign borrowing by Vietnamese businesses will still be limited due to the high international interest rate environment and Vietnam’s credit rating is still low (BB+ according to S&P).

In addition, current transfers are always in surplus due to the stability of remittance flows to Vietnam.

Vietnam’s foreign exchange reserves in 2023 are forecast by the IMF to reach about 100 billion USD, and in 2024 to more than 110 billion USD. This is quite a safe level, equivalent to about 17-18 weeks of import.


On the contrary, the income balance is still expected to have a high deficit due to payments and withdrawals of profits from FDI to the country in the context of high interest rates and some countries applying income tax exemption policies when businesses Their businesses repatriate profits (e.g. Korean FDI).

The IMF forecasts that Vietnam’s income balance will have a deficit of 20.2 billion USD in 2023 and 21.3 billion USD in 2024. The large VND – USD interest rate difference is a challenge in foreign exchange management in Vietnam. . Maintaining low interest rates can help domestic businesses and people increase their access to capital, but the side effect is causing foreign capital to flow out of Vietnam to high-interest rate markets.

“According to our research, in the first 9 months of 2023, Korean businesses investing abroad have transferred about 31 billion USD back home, 12 times higher than the same period last year, because the Korean Government pegged interest rates at high and there are many preferential policies to encourage Korean businesses to bring in money to help stabilize their macroeconomy,” said Mr. Nguyen Quang Thuan, Chairman of Fiin Group.

Observing the moves of major central banks in the world, it can be seen that the high interest rate environment will still be maintained at least in the first half of 2024.

The Fed’s December policy meeting will take place on December 13, 2023. Important reports on the job market and inflation in November 2023 were published previously. Recent statements from many Fed members along with US economic data seem to confirm the possibility that interest rates will be kept unchanged at this meeting. The market is expecting the Fed to start cutting interest rates again as early as May 2024 with a 50% chance.

Inflationary pressures in the euro area are cooling as expected, but wage growth remains strong and the long-term outlook is uncertain, so the European Central Bank’s battle to contain price increases remains uncertain. end. The ECB raised its base interest rate to a record high of 4% earlier this year to stem the rise in inflation but has recently signaled policy stabilization in the next few quarters.

Forecasts have begun to prepare for the ECB’s first interest rate cut, which could take place in April or June next year. ECB President Lagarde said she expected inflationary pressures to continue to weaken with high interest rates, low growth and a weaker job market helping the ECB successfully bring inflation back to its target level of 2%.

Meanwhile, Vietnam’s services balance is forecast by the IMF to have a deficit of 10.4 billion USD in 2023 and 9.9 billion USD in 2024. This deficit has narrowed compared to the period 2020-2022, when The whole world went into lockdown to prevent the spread of Covid-19. An important factor contributing to the balance of services (the number of international visitors to Vietnam) has not yet recovered to pre-pandemic levels.

According to the General Statistics Office, in November 2023, international visitors to Vietnam reached 1.2 million, an increase of 10.9% compared to the previous month and 3 times higher than the same period last year, but only equivalent to 75% of the level. Average before Covid-19 epidemic…

The content of the article was published in Vietnam Economic Journal No. 49-2023 published on December 4, 2023. Dear readers, we invite you to read here This: Kinh-te-viet-nam

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