Vietnam Posts Rising Trade Surplus, Buoying Forex Market

Tuan Minh

11:17 17/08/2016

BizLIVE - Vietnam reported a trade surplus of $2.25 billion in the first seven months of this year, helping keep the forex market steady.

Vietnam Posts Rising Trade Surplus, Buoying Forex Market

Phones, mostly produced by Samsung, formed Vietnam's largest export staple in January-July. Photo: Internet

Vietnam posted a trade surplus of $2.25 billion in the first seven months of this year, compared to a deficit of $3.91 billion in the same period last year, data of the General Department of Vietnam Customs showed.
The country’s export turnover increased 5.4% year-on-year to $96.99 billion in the period, while it spent $94.73 billion on imports, sliding 1.2%.
The government-run General Statistics Office last month estimated the country’s trade surplus at $1.8 billion for the seven-month period.
Foreign Firms Still Drive Trade
Total trade of foreign-invested enterprises operating in Vietnam reached $123.13 billion between January and July, accounting for 64.22% of the country’s total turnover.
Their exports rose 8.6% year-on-year to $67.6 billion while their import turnover slipped 2.1% to $55.54 billion.
These companies earned a trade surplus of $12.06 billion in the period, offsetting a hefty deficit of $9.81 billion reported by domestic ones.  
Phones and spare parts continued to buoy the country’s trade as their exports went up 14.3% to $19.6 billion.
Samsung is the biggest phone manufacturer in Vietnam. Around one third of the South Korean conglomerate’s mobile devices sold globally are produced in Vietnam, according to the Nguoi Lao Dong (Laborer) newspaper.
On the other hand, companies in Vietnam spent the most on importing computers, electronic goods and spare parts.
Stable Forex Market
The Vietnamese foreign exchange market has not undergone strong fluctuations since the start of this year after the central bank launched a market-adjusted inter-bank USD/VND rate mechanism in January this year.
A positive trade balance has also contributed to stability in the forex market, which took a hard blow from strong devaluations of the Chinese yuan and the Fed’s interest rate hikes last year.
Even a trade deficit of $3 billion to $5 billion this year would have a minor impact on the USD/VND rate, given strong inflows of remittances and foreign loans, said Le Tien Dong, deputy general director of Artex Securities.
The forex rate would fluctuate strongly in case of a prolonged and large trade gap, he added.  
The supply of foreign currencies in Vietnam has been abundant since the start of this year, with actual foreign direct investment (FDI) rising 15.5% year-on-year to $8.55 billion in the first seven months of this year.
Remittances to Ho Chi Minh City rose 3% year-on-year between January and June to $2.1 billion. Remittance inflow usually account for a half of Vietnam’s total.
Overseas Vietnamese last year sent home some $12.3 billion, making the country among the top remittance recipients in the world.
The State Bank of Vietnam (SBV) purchased around $8 billion worth of hard currencies in the first half of this year, bringing its reserve fund to a record high of $38 billion in mid-June, according to local media and HSBC’s Macro-prospect report.
“I bet the USD/VND rate would not fluctuate more than 1% this year if the State Bank of Vietnam maintains a considerable spread between interest rates in the dong and those in the U.S. dollar as seen currently,” Dong noted.