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Can Vietnam resist the global monetary crisis?

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Turkey, Argentina and other countries have recently witnessed their local currencies depreciating dramatically against dollars. How about Vietnam? 

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Will the crisis spread to Vietnam? 

 

Analysts have reasons to worry that the monetary crisis may spread to emerging and frontier economies, including Vietnam. 

Some economists, pointing out the differences in Vietnam, believe things won’t be bad for Vietnam.

The crisis is occurring in economies with weakness and macroeconomic instability.

These particular economies are now suffering from foreign capital outflow and bear influences from the China-US trade war. In contrast, the macroeconomic situation in Vietnam is believed to be stable.

In Argentina, the inflation rate has surpassed 30 percent. The interest rate, after some adjustment, has reached the highest level in the world – 60 percent. 

In Vietnam, the inflation rate is still within control. The CPI (consumer price index) by the end of August has increased by 3.98 percent compared with the same period last year. The interest rate has been stable at a low level, thus supporting businesses’ plans to expand production.

As for Indonesia, the serious account deficit is one of the major factors worrying foreign investors, thus leading to a wave of foreign capital withdrawal.

Doanh Nhan Sai Gon cited foreign sources as reporting that the current account deficit of the country was 1.7 percent GDP in 2017, while the figure may be 2.5 percent this year.

As foreign capital was withdrawn and the local currency depreciated, the Indonesian central bank raised the interest rate to stabilize the currency value.

Meanwhile, Vietnam maintained a high current account surplus, over 8 percent in the first quarter of the year.

A Financial Times’ report released recently showed that Vietnam, the Philippines and Indonesia all may suffer from the US-China trade war because the three economies rely on exports.

However, unlike Vietnam, the current account deficit in the Philippines and Indonesia will cause the two economies to suffer more heavily if the current balance crisis occurs.

Political uncertainties are not the only problem for Turkey. Ankara borrows foreign currencies much more so than any other countries.

As for Vietnam, the foreign debt is still within control, with the ratio of sovereign debt to GDP below the permitted level. The improvement in credit rating rankings will help reduce Vietnam’s capital borrowing costs and the CDS spread. 

This will also consolidate foreign investors’ confidence in Vietnam. According to the General Statistics Office (GSO), FDI capital had reached $13.5 billion by the end of August. 

 

Source: VNN

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