Vietnam's forex reserves have fallen sharply as the SBV intervenes in the money market. (Photo: Internet)
The country’s reserve fund is equivalent to an estimated 2.1 months of import cover, down from 2.6 months in June, HSBC said in its monthly “Vietnam at a glance” report, released on Dec. 3.
The UK bank warned that Vietnam could incur twin deficits in the current account and the balance of payments in 2016.
“In 2016, we forecast the current account balance to slip into a deficit equivalent to 1.6% of GDP from an estimated 0.2% surplus in 2015 and a 5.1% surplus in 2014.”
The balance of payments has been under pressure due to the combination of the thinning current account surplus and short-term capital outflows. “The likely return of current account deficits in 2016 means that the balance of payments may remain under pressure in 2016 and into 2017,” said HSBC.
The State Bank of Vietnam, the country’s central bank, which managed a reserve fund of $37 billion and 10 tons of gold at the end of July, had pumped an estimated $4 billion into the money market in the year to the end of August to ease constraints in the forex
market, the Saigon Times newspaper reported.
The USD/VND rate has been volatile over the past few weeks, nearly reaching the ceiling of 22,547 stipulated by the central bank, amid speculation that the Fed could lift interest rates this month.