VN’s payment balance shows stronger resilience

Vietnam’s balance of payments has shown signs of resilience in 2010, in two areas in particular, according to the latest report issued by Standard Chartered Bank.

First, the average monthly trade deficit was contained at USD960 million  during the first nine months of the year, compared with USD2.2 billion  in 2008.

Stable commodity prices in 2010 have been helpful in this regard, as the cost of imports, especially steel, petrol and petrochemicals, has remained broadly stable. A pick-up in overseas workers’ remittances is also helping to limit the current account deficit, reported the bank.

Second, capital inflows from foreign direct investment (FDI) and official development assistance (ODA) are improving, and this will help to fund the current account deficit.

Notwithstanding potential inflation and trade deficit pressures, the bank expects Vietnam to be the third fastest growing economy in Asia in 2011, after China and India, with forecast growth rates of 6.7 percent in 2010 and 7.2 percent next year.

Edward Lee, the bank’s Regional Head of Rates Strategy for Asia, said the government should focus on stabilizing the macro-economy and the State Bank of Vietnam needs to adjust monetary policy based on the economy’s demands.

Lee said he believed that Vietnam would tighten monetary policy to curb inflation and build up market confidence if the nation foresees higher inflation in 2011 due to stronger GDP growth and growing food prices on the global market.

Source: VNA

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