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VND will be stabilized in 2012: HSBC
The Hongkong and Shanghai Banking Corporation (HSBC) has predicted that the weaker import demand and a controlled weakening of the exchange rate by the SBV will help stabilise the Vietnam dong (VND) in 2012.
According to HSBC’s "Vietnam 2012 Outlook: Some progress, but patience required" report which was released on February 20, inflation is easing and expected to reach single digits by the end of this year.
However, the report says, Vietnam will see growth slowing, due to more cautious spending and weaker exports in 2012.
In contrast to 2011, which began with a sharp weakening of the currency, high inflation, and several tightening measures, 2012 will be more stable thanks to the slower inflation, better management of the macroeconomic policy by the new Governor of the State Bank of Vietnam, and improved trade and fiscal positions, says HSBC.
The leading banking corporation has also predicted that 2012 trade deficit will stabilize at US$10.1 billion (versus US$9.8 billion in 2011) and the consolidated government balance is expected to decelerate to 3.8 percent from 3.9 percent last year.
For example, the VND has stabilized in recent months. The VND usually comes under a lot of pressure during the Lunar New Year festival (Tet), this did not happen in 2011 for several reasons including imports growing more slowly than exports and the remittances being robust; the SBV daily raising reference rate and allowing the VND to gradually depreciate, as well as intervening when the spread widened; many companies accelerating the pace of their USD loan payments; and the increasing demand for VND during the Lunar New Year due to seasonality factors and the merging of three small banks (De Nhat Commercial Bank, Tin Nghia Bank, and Saigon Commercial Bank).
HSBC is optimistic about Vietnam’s monetary policy in 2012 as SBV Governor Nguyen Van Binh is doing his best to fulfill his promise.
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