Remittance expectations fluctuate for 2016

It has been generally agreed that 2015 was a “bumper year” for Vietnam in terms of remittances, with HCM City alone receiving US$5.5 billion, slightly higher than the estimated US$5.2 million.

This was also reflected in the impressive turnover recorded by remittance companies. Last year, Dong A Money Transfer Company received US$1.4 billion in overseas transfers and Sacombank’s Money Transfer division posted a similar turnover of US$1.5 billion.

In the first two months of this year alone, HCM City has received more than US$900 million.

In spite of the strong growth, several experts say they are not so confident that remittances will be stable in the upcoming months and years.

Explaining their doubts, they say that the US Federal Reserve (FED) is likely to continue implementing its roadmap to increase the interest rate on the greenback, affecting the dong-dollar exchange rate, given that the State Bank of Vietnam has already decided to apply flexible adjustments based on market demand, and to reduce the interest rate on dollar deposits to zero per cent.

This would make overseas Vietnamese reluctant to transfer  their savings to the country, since they would receive less benefits from the transfers, except in cases where they are investing in projects with high returns.

However, there are some experts expressing a contrary opinion, saying a significant growth in remittances is likely this year.

They say that the forex rate between đồng and dollar would likely increase by three or five percent this year, thus encouraging overseas Vietnamese to transfer more their savings to Vietnam to enjoy the benefits of a favourable exchange rate.

The clear recovery of the local real estate market, and the amended Housing Law that allows foreigners and overseas Vietnamese to own houses in Vietnam are also important factors likely to motivate overseas Vietnamese to transfer their money, they say.

The optimistic experts also say that the FED may delay its plan to increase the interest rate this year. They point to the Federal Open Market Committee’s observation that some main economic indicators of the US has slowed down recently as the US economy is impacted by financial and economic fluctuations of other major economies in the world.

For their part, domestic remittance companies say they expect a rather modest turnover growth of about 10% this year.

For instance, the DongABank Money Transfer Company has set a target of US$1.5 billion, just US$100 million higher than last year.

Sacombank’s remittances turnover is estimated to grow by between 15% and 20%, this year, bank officials say.