The stability of exchange rate in 2012 helps Viet Nam to realize a number of economic targets. This can be considered as a dominant outcome of the country’s monetary policy.
Firstly, the stable exchange rate has effectively contributed to the Government’s effort to curb inflation as prices of imported materials and equipment did not increase, thus amplifying inflation was not seen this year.
The above signal has helped maintain market stability. Consumer price index (CPI) in 11 months only went up by 0.47 percent against October, much lower compared to the two previous years.
The State Bank of Viet Nam took advantage of the market situation to buy in a large volume of US dollar in abid to raise foreign reserve.
The stability of the exchange rate was attributed to the considerable inflow of foreign currencies into Viet Nam. Registered foreign direct investment reached over US$12.4 billion while official development assistance is estimated to amount to a record high of more than US$3.5 billion compared to US$2.9 billion last year.
Years earlier, trade deficit was high, with US$14.2 billion in 2007, US$18 billion in 2008, US$12.9 billion in 2009, US$12.6 billion in 2010 and US$9.8 billion in 2011. In the past 11 months, Viet Nam gained a trade surplus of US$14 million.
This year’s remittance may surge to US$11 billion from US$9 billion last year and foreign arrivals’ spending is estimated at US$6.5 billion, up nearly US$1 billion from the previous year.
Thanks to low inflation, foreign currency speculation and dollarization spiraled down, easing pressure against the exchange rate. Moreover, the VND deposit rates were higher than foreign currency deposit ones.
Besides, the Government has been consistent with measures to rein in inflation, trade deficit and maintain proper growth rate.
The stability of the exchange rate also resulted from shrinking investments and consumption.
VGP
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