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Viet Nam dong more stable in 2012: HSBC research

Update: February, 20/2012 - 17:52

HCM CITY – Viet Nam's inflation has decreased and is expected to hit single digits by the end of the year, according to a recently released HSBC Global Research findings.

This is attributed to efforts by the State Bank of Viet Nam (SBV) to gradually weaken the Viet Nam dong and dampen demand for imports.

HSBC believes Viet Nam's economy will be more stable and that factors contributing to the trend include slower inflation, better management of macro-economic policy by Governor Nguyen Van Binh, and improved trade and fiscal positions.

These findings are contrary to last year, which began with a sharp weakening of the currency, high inflation and several tightening measures.

The research also suggests the trade deficit is expected to stabilise at US$10.1 billion, while the consolidated government balance is expected to fall to 3.8 per cent this year from 3.9 last year.

The dong's stability in recent months was a major factor indicating that in history the dong comes under pressure during the Lunar New Year period due to stronger demand for US dollars. This reflected a rush toward the end of the year to pay for dollar-denominated loans, as well as higher demand for imports during the holiday period. This did not happen last year because of a range of issues including imports growing slower than exports.

The research indicates a period of slow growth in 2012 due to cautious spending and weaker exports has occurred, but that the country is heading in the right direction this year amidst global economic uncertainty.

"Encouragingly for Viet Nam's monetary policy in 2012, the Governor Nguyen Van Binh is communicating his intentions clearly and following through on his promises," the report states. – VNS

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