Remittances 'revive', more than 10 billion USD flows into Vietnam

During the days before Tet, the important foreign currency channel, remittances in 2017, also flowed in rapidly, increasing by 10.7% compared to 2016. The estimated remittances to Vietnam in 2017 reached more than 10 billion USD. The markets that account for a large proportion of the remittance supply to Vietnam are the US, China (including Taiwan, Hong Kong, Macau), South Korea, and Japan.

Remittances in 2017 increased by 10.4%

At the end of 2017, the State Bank of Vietnam, Ho Chi Minh City branch, reported that the amount of remittances sent to Ho Chi Minh City reached 4.55 billion USD in the first 11 months of 2017. Accordingly, the amount of remittances is mainly from the US market, accounting for 60% and Europe nearly 20%. At this rate, remittances in 2017 to Ho Chi Minh City are expected to reach about 5.2 billion USD, equivalent to or higher than in 2016 but lower than in 2015.

The currency market in the days before Tet has been moving in the direction of USD price decreasing, foreign currency buying activities are quite busy. Accordingly, at Vietcombank, the selling price has decreased from 22,745 VND to 22,740 VND. Meanwhile, the State Bank of Vietnam (SBV) has maintained a net foreign currency buying status, even appearing on some days with quite large buying volume of about 400 - 500 million USD.

A source from the State Bank of Vietnam revealed that at the end of the first week of February 2018, foreign exchange reserves had surpassed the threshold of 57.5 billion USD and could continue to “break” the record in the coming days. In addition to the strong supply from foreign investment capital and capital through the stock market, the capital channel from overseas remittances is also quite important.

A representative of the State Bank of Vietnam's foreign exchange department shared: The current situation is very positive, the amount of remittances this year has skyrocketed. Specifically, according to statistics up to the end of 2017, remittances increased by 10.4% compared to 2016. (estimated at 10 billion USD - PV).

“Currently, remittances to Vietnam are sent through four channels: through the commercial banking system, economic organizations, customs and post offices. The most popular remittance channel is through the commercial banking system with a wide network, modern and safe services for large value transactions, accounting for about 72.6% of remittance turnover (the rest can go through unofficial channels). The markets that account for a large proportion of remittance supply to Vietnam are the US, China (including Taiwan, Hong Kong, Macau), South Korea, Japan…”, said Mr. Nguyen Ngoc Canh, Director of the Foreign Exchange Department.

Where do remittances go?

Remittances to Vietnam have been increasing continuously since 2010 and reached 13.2 billion USD in 2015, but decreased by 33% in 2016 with remittances to Vietnam reaching only 9 billion USD. The World Bank's Migration and Development Report (October 2017) also forecasts that remittances to Vietnam in 2017 will decrease by 10% due to the impact of the US's interest rate and immigration policies, while domestic foreign currency deposit interest rates are low at 0%.

However, if we apply the figures as reported by the State Bank, we can see that, in fact, after a year of fluctuations, the remittance flow has now "revived". "Statistics on remittance data since the State Bank imposed the USD interest rate ceiling show that the amount of remittances has remained relatively stable and increased sharply. The remittance flow to Vietnam in the past time has not been affected by the difference in USD interest rates between Vietnam and the world as well as the USD interest rate policy of the State Bank", Mr. Canh said.

So will remittances continue to increase in the coming years? The National Center for Socio-Economic Information and Forecast (NCIF) of the Ministry of Planning and Investment stated: In 2018, remittances to Vietnam will face many pressures. The reason: Vietnam is clearly affected by the anti-immigration policy of US President Donald Trump and the FED's policy of raising interest rates on remittances flowing into the country, because the US is the largest provider of remittances to Vietnam, with a rate of up to 60%.

However, according to the representative of the State Bank of Vietnam’s Foreign Exchange Department, the current remittances are not only from Vietnamese people in the US but also from new labor flows from the Middle East, South Korea, Taiwan (China), Japan, etc. “The nature of some channels in remittances is to support relatives and is a source of income for Vietnamese workers abroad to transfer back to the country to support their families. Besides a part for investment…”, the representative of the State Bank of Vietnam’s Foreign Exchange Department affirmed.

Banks compete to attract remittances near Tet

The amount of remittances sent to Vietnam often increases sharply near Tet, so banks are rushing to absorb this money flow.

Promoting the potential of remittances

(Baonghenan) - Overseas Vietnamese remittances through banks in 2015 reached 180 million USD. Most of it is being used by people, most of it for investment in buying houses and vehicles, and the rest for production and business.

So far, where are remittances flowing in? According to the Ho Chi Minh City branch of the State Bank of Vietnam, the domestic macro economy has been stable recently and the pressure to increase the exchange rate due to market sentiment has disappeared, so remittance recipients have gradually switched from foreign currency to holding VND to earn interest, especially when the interest rate on USD savings has now dropped to 0%. In addition, most of the remittances are used by people for production and business, not stored, spent or focused on real estate and stock investment as before.

According to the State Bank of Vietnam’s Foreign Exchange Department, in 2017, the increase in Vietnamese workers going abroad was one of the factors ensuring the stability of remittances. In addition, the stability of the domestic macro economy, the flexibility of monetary policy management and the new exchange rate mechanism also created a more attractive business environment for remittances to the country.
The representative of the foreign exchange department further noted: The remittance statistics of the State Bank and the International Monetary Fund (IMF) are always different but proportional (the IMF's is usually higher because it always takes into account all channels). In 2017 alone, the overall absolute figure of Vietnam increased./.