The domestic foreign exchange market is forecast to remain stable this year. (Photo: VNA) Hanoi (VNS/VNA) -The US Federal Reserve (Fed)’s third interest rate hike this week would notaffect Vietnam’s economy significantly as the move was foreseeable, accordingto experts.
Fed policymakers on September 26lifted the benchmark overnight lending rate by a quarter of a percentage pointto a range of 2 percent to 2.25 percent.
The Fed’s move comes amid acomplicated international market with the accelerating US-China trade war andcentral banks in some countries tightening monetary policy.
However, according to Can Van Luc,chief economist at the Bank for Investment and Development of Vietnam (BIDV),the Fed’s interest rate hike had been forecast so international and domesticmarkets were prepared for it.
Lucc said the Fed’s move shouldnot concern Vietnam’s financial and monetary markets as the domestic macro-economywas stable while outstanding loans in US dollars were less than 8 percent oftotal outstanding loans.
Luc estimated that the country’sforeign debt would increase insignificantly as US dollar debts account for justa third of the country’s total while the hike could be offset by thedepreciation of other currencies.
Luc also believed the exchangerate would remain stable thanks to the State Bank of Vietnam’s daily referenceexchange rate policy and the nation’s high foreign reserve.
The Fed’s impact on the capitalinflow into Vietnam’s stock market was also insignificant, especially after theVietnamese market on Thursday was classified as a frontier market and added toFTSE Russell’s watchlist for a possible future upwards reclassification asSecondary Emerging, he said.
Reports also showed that in thepast nine months, foreign investors remained net buyers of 1.5 billion USD in Vietnam’sstock market, he said.
However, Vietnam still needed tomonitor another Fed rate hike in December, three more next year, and oneincrease in 2020, while the global current economic situation remainedcomplicated.
Sharing the same view, Ngo DangKhoa, head of markets at HSBC Vietnam, said that the pressure of the Fed’sinterest rate hike on Vietnam’s exchange rate and interest rate still existedas the Fed was not finished there.
“This pressure will depend onfluctuations of the Chinese renminbi as China is one of Vietnam’s largest tradepartners,” Khoa told cafef.vn.Export value to China accounts for more than 20 percent of Vietnam’s totaltrade turnover, and Vietnam has the largest trade deficit with China.
The Fed’s policy to continueincreasing interest rates would also put more risks on Vietnam’s capitalinflows and inflation, Khoa said, adding that regulations to stabilise thedomestic macro-economy would become more challenging.
In a report released on September26, the Asian Development Bank (ADB) also noted that despite the downwardrevision for growth this year, Vietnam’s inflationary pressures were likely topersist in the short term.
According to the ADB, the VNDhas exhibited more weakness since July and could come under continued pressureas US interest rates rise and the dollar strengthens. Depreciation of therenminbi against the dollar, if it continues, could further put pressure onthe VND, adding to inflation, the ADB said.-VNS/VNA
VNA
