However, the National Centre for Socio-Economic Information and Forecast (NCIF) under the Ministry of Planning and Investment has predicted that overseas remittances will come under pressure this year as the global economic recovery and international investment capital flows will have a significant impact on the inflows of foreign direct investment (FDI) and foreign remittances to Vietnam.
The NCIF says further pressure on remittances to Vietnam will keep going on this year due to US President Donald Trump’s tightened immigration policy. In addition, the Federal Reserve System’s plan to raise the US dollar’s interest rate this year will have a large influence on remittances to Vietnam with 60% of which come from overseas Vietnamese in the US. Meanwhile, the deposit rates of foreign currencies at home remain low.
The US interest rate hike puts more pressure on the VND exchange rate and is one reason behind the State Bank of Vietnam (SBV) keeping its USD deposit rate at zero, which it has set since December 18, 2015 to reduce domestic demand for foreign currencies.
Sharing a similar view with the NCIF, Dr. Nguyen Tri Hieu, a financial and banking expert, says that US$13.8 billion released by the World Bank were not an accurate reflection of the remittance situation in 2017.
The US President’s immigration policy already made an impact last year. The USD deposit rate in Vietnam is currently at zero, while the growing interest rate in the US resulted in a slower flow of remittances from the US, Hieu analyses.
He forecasts that remittances will continue to be affected by US immigration and trade policies as President Trump will likely enact measures to limit certain trade coming into the country, thus driving up the prices of products imported to the US market. With such current trade policy, the inflow of remittances from the US into Vietnam may remain stable, excluding the possibility of the counter effect that will reduce remittances, Hieu notes.
In fact, accurate information about remittances for 2017 is required in order to give valid opinions and specific forecasts for 2018. However, some experts optimistically affirm that a favourable domestic business environment is seen as a contributory factory to remittance attraction through higher investments in business operations and real estate and a flow of migrant worker’s money transfers into Vietnam.
Furthermore, the stable Vietnam Dong/US dollar exchange rate will be a favourable factor for bringing in remittances. In addition to a stable foreign exchange, there will be a consolidation of trust if monetary and foreign exchange policies are implemented as effectively as last year.
Nguyen Ngoc Canh, Head of the Foreign Exchange Management Department of the State Bank of Vietnam, says positive signs are seen in the volume of remittances which have increased by more than 10% to US$10 billion.
Since the SBV applied the ceiling interest rate for the US dollar, foreign remittances have remained healthy and shown strong growth without facing any impacts by the difference in US interest rate in Vietnam and internationally, and, or by the USD interest rate policy of the SBV.
Remittances have been transferred to Vietnam via four channels: commercial banks, economic organizations, customs, and post offices. Commercial banks are the most popular money transfer model, handling 72.6% of overseas remittances. The US, China (including Taiwan, Hong Kong, and Macao), the Republic of Korea, and Japan are major sources of supply.