Foreign investment flow in Vietnam is surging, according to the latest report on Vietnam’s economy provided by Standard Chartered bank.
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| Foreign investment in Vietnam continues to rise (Photo by QD) |
Standard Chartered bank has just revealed its report on Vietnam’s economy over the first 8 months of 2010. The report includes the bank’s assessments on issues related to inflation and trade deficit.
According to the bank’s economic experts, inflation has remained under control at 8.2% compared with the same period of last year. During the first 8 months, trade deficit had a total value of over USD 8 billion. Among that, the total value of trade deficit in August alone was stable at USD900 million.
The bank’s experts gave out their evaluations on two solutions aiming to maintain stability of inflation and trade deficit issued by the government and the State Bank. They said that in order to boost export growth and limit import, the increase of reference rate between US dollar and Vietnam dong at 2% made on August 18 has helped prevent the potential trade deficit from rising.
According to Circular No. 122/2010, which has just been issued by the Ministry of Finance (MOF) and goes into effect beginning October 1, industrial and essential consumer products of private and foreign owned companies will be given policies to follow in order to control prices.
The bank said these two solutions would bring certain effectiveness. Firstly, inflation in the next period will be curbed, especially in the circumstance where prices of energy and food in the world will not go up so strongly, “However, we do not believe that controlling inflation would be effective if input costs made continuous increases,” highlighted the report.
Secondly, the devaluation of the Vietnam dong in the recent period will continue hurdling policy makers from cutting down interest rates. The country will face a trade deficit for a medium time and the Vietnam dong will likely lose value during the period of 2010 and 2011.
Stabilising prices of food and energy in the global market has helped to control prices on the domestic market. Inflation of construction materials (taking up 10% of the total value of the consumer price index - CPI) and transportation expenditures (taking up 8.9% of the total value of CPI) are reducing gradually, bringing stability to inflation.
Inflation of food, which is a major component of the basket of consumer goods, accounts for 40% of the total value of CPI that has risen in last 3 months. However, its increase was not strong enough to impact other factors involving inflation which tend to decrease.
Trade deficit has been mostly stabilised in the first 8 months at around USD1 billion each month thanks to the strong growth in export and import limitations.
Meanwhile, the disbursement of foreign direct investment (FDI), official development assistance (ODA) and the volume of remittances transferred into Vietnam are gaining a solid recovery.
According to the Ministry of Planning & Investment, during the first 8 months, the disbursement of FDI and ODA was a value of USD7.25 billion and USD1.81 billion respectively. From January to July of 2010, the volume of remittances transferred into Vietnam was USD3.9 billion.