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Earlier this year the Japanese yen hit a 38-year low against the greenback and it’s currently sitting about 15 percent lower now than it was at the start of the year. Similarly, the Vietnamese dong took a big fall but has been propped up by the State Bank which has by extension kept the local currency higher against the Yen too. This article looks at what that might mean for Vietnam: What Does a Devalued Yen Mean for Vietnam?
Banking and Finance News
Vietnam bad debt hits 6.9 percent
Bad debt in Vietnam reached 6.9 percent in the first half of this year, according to the State Bank’s Deputy Governor Dao Minh Tu. This coincides with stronger credit growth this year than last but may suggest these new loans are not of the highest quality.
Of note, pursuant to amendments to Circular 39 made in June, loan applications for less than VND 100 million or about US$4,000 no longer need to detail a plan for the borrowed funds. Also back in November and December of last year, to meet annual credit growth targets, Vietnam’s banks embarked on some pretty aggressive lending campaigns that saw credit growth jump considerably but in what looked like mostly consumer loans. It could be that some of these loans are now turning bad.
State Bank short-term lending hits US$1.73 billion
The State Bank of Vietnam has continued to issue treasury bills to suck up excess liquidity in the economy. There are currently US$3.19 billion worth of T-bills outstanding as of the close of business on July 25. Also of note is that the State Bank has outstanding loans to local banks to the tune of US$2.08 billion.
See also: Vietnam Dong Tracker: Daily Updates.
Outstanding loans
| Issued | Length | Maturing | VND (billions) | US$ | % p.a. |
| 18-Jul | 7 | 25-Jul | 5,921 | $234,064,807 | 4.50 |
| 18-Jul | 7 | 25-Jul | 11,639 | $460,125,662 | 4.50 |
| 18-Jul | 7 | 25-Jul | 13,063 | $516,429,273 | 4.50 |
| 18-Jul | 7 | 25-Jul | 13,999.99 | $553,468,605 | 4.50 |
| 18-Jul | 7 | 25-Jul | 8,000 | $316,267,605 | 4.50 |
| Total | 52,623 | 2,080,355,952 |
*billions
Outstanding T-bills
| Issued | Days | Maturing | VND | US$ | % p.a. |
| 11-Jul | 14 | 25-Jul | 7,050 | $278,711,175 | 4.50 |
| 12-Jul | 14 | 26-Jul | 14,750 | $583,119,125 | 4.50 |
| 15-Jul | 14 | 29-Jul | 5,950 | $235,224,325 | 4.50 |
| 16-Jul | 14 | 30-Jul | 11,200 | $442,775,200 | 4.50 |
| 17-Jul | 14 | 31-Jul | 8,100 | $320,221,350 | 4.50 |
| 17-Jul | 14 | 31-Jul | 17,100 | $676,022,850 | 4.50 |
| 17-Jul | 14 | 31-Jul | 5,750 | $227,317,625 | 4.50 |
| 18-Jul | 14 | 1-Aug | 3,850 | $152,203,975 | 4.50 |
| 18-Jul | 14 | 1-Aug | 3,950 | $156,157,325 | 4.50 |
| 18-Jul | 14 | 1-Aug | 1,600 | $63,253,600 | 4.50 |
| 18-Jul | 14 | 1-Aug | 1,300 | $51,393,550 | 4.50 |
| Total | 80,600 | 3,186,400,100 |
*billions
Car news
Vietnam’s PM pushes car registration reduction, despite legal risks
Vietnam’s Prime Minister Pham Minh Chinh has asked the Ministry of Finance to put together a draft decree that would reduce registration fees for locally assembled cars by 50 percent. Concerns were raised by the ministry last week, however, that the policy could contravene the European Vietnam Free Trade Agreement and Vietnam could be at risk of being sued.
Car registration fee cuts have been popular in the past, particularly after COVID, to stimulate the local economy. It has been revealed, however, that last year the EU suggested by applying the cut to domestically made and assembled cars only, that this would violate terms in the EVFTA.
Car imports from Europe to Vietnam mostly came from France and Germany in the first half of this year and were worth a little shy of US$10 million collectively.
See also: Vietnam’s Automotive Industry: Foreign Investor’s Guide 2024
Economy news
Vietnam is targeting GDP CAGR of 10.18 percent to 2030
In a government action plan approved Monday, a GDP per capita target of US$7,500 has been set by 2030. Vietnam’s GDP is currently US$4,620 according to IMF data which would mean Vietnam’s GDP would need to grow at a compounded annual growth rate–a CAGR–of 10.18 percent. For comparison, in the last five years, Vietnam’s GDP has grown at a CAGR of just 6.08 percent.
This is an ambitious target purely based on the numbers. However, there is a lot more to it than that. Vietnam’s economic growth in recent years has largely been driven by foreign direct investment and influenced by the greater global economy which has faced a number of issues including the pandemic and wars in Ukraine and Gaza. In this context, Vietnam’s economy is not exactly on a stable footing making it unclear exactly how it might fare in the short to medium term.
See also: Vietnam’s Economy in the First Half of 2024: Unpacked.
Energy news
Offshore wind in Vietnam should be developed by state first: MoIT
Vietnam’s Ministry of Industry and Trade has suggested that offshore wind should initially be developed by a state-owned enterprise. The remarks come in the context of the ‘national security implications’ of offshore wind, according to state media, along with a number of other conflicts between various government departments.
Of note, the Power Development Plan 8–known in short as the PDP8–that was approved last year, was embedded with a target of six gigawatts of offshore wind power by 2030. The implementation plan for the PDP8 released earlier this year, however, did not list a single offshore wind power project.
This is in line with a lack of a marine spatial plan which has been held up as the Ministry of Natural Resources and Environment struggles to balance the interests of a multitude of stakeholders.
In this context, this proposal looks to be an attempt to work around this bottleneck.
See also: Vietnam’s Offshore Wind Power Holdup: Unpacked 2024
Vietnam kicks off construction of waste-to-energy plant in HCMC
Bamboo Capital Group, a Vietnamese private conglomerate, has kicked off construction on the Tam Sinh Nghia waste-to-energy plant in Ho Chi Minh City. The plant will be built in three phases, with the first phase facilitating the incineration of 2,000 to 2,600 tons of waste daily, accounting for 20 to 25 percent of the city’s discharge.
Statistics from 2023 show that Ho Chi Minh City produces 9,800 tons of domestic waste daily, reaching up to 11,000 tons during peak holiday periods. There are, however, no waste-to-energy plants in operation in the city with Tam Sinh Nghia set to be the first.
See also: Electricity in Vietnam: Foreign Investor Cheat Sheet 2024
Vietnam state power provider reports first-half loss of US$513 million
In the first six months of this year Vietnam’s state power provider, EVN, recorded a loss of VND 13,000 or US$513 million. This is despite an increase in retail electricity prices earlier this year.
Of note, Retail electricity prices in Vietnam are regulated and, though permitted, price rises are not all that common. This has led to EVN selling electricity below cost price. As of January, it was losing about VND 142.5 per kilowatt-hour sold. This has been ongoing for some time and has led to EVN accumulating the huge aforementioned losses. The issue here seems to be a reluctance to raise electricity prices rather than an inability to do so.
See also: Electricity in Vietnam: Foreign Investor Cheat Sheet 2024
Food and beverage news
Vietnamese to consume additional 2.56 million litres of soft drink by 2033
Vietnamese are expected to consume 4.87 million litres of soft drinks this year and that number is expected to grow to 7.43 million litres by 2033, according to a Markets and Research report. This represents an increase of 2.56 million litres and a compounded annual growth rate of 4.8 percent.
Of note, Vietnam is currently debating adding soft drinks to the list of items subject to Vietnam’s Special Consumption Tax. The Ministry of Finance has suggested a ten percent tax on drinks with 5 grams or more of sugar per 100 millilitres. This legislation, however, is still in its draft stage.
See also: Vietnam looking at introducing sugar tax on soft drinks
Stock market news
Foreign traders net withdraw US$46.6 million from local bourse
Foreign traders have continued to sell down their positions in the Ho Chi Minh City Stock Exchange. In total, just over US$13.2 million was withdrawn from the market over the last five trading sessions to the close of business on July 24. This brings the total net withdrawn from the market by foreign traders to just over US$2.48 billion so far this year.
See also: Vietnam’s Foreign Investor Stock Sell-Off: Unpacked 2024
Foreign trader activity, last five trading days
| Buy | Sell | Change | ||||
| Date | VND* | US$ | VND* | US$ | VND* | US$ |
| 19/7 | 1,714 | $67,760,419 | 2,078 | $82,150,613 | -364 | -$14,390,194 |
| 22/7 | 2,074 | $81,992,479 | 1,665 | $65,823,278 | 409 | $16,169,202 |
| 23/7 | 1,570 | $62,067,595 | 1,698 | $67,127,883 | -128 | -$5,060,288 |
| 24/7 | 2,211 | $87,408,569 | 1,973 | $77,999,596 | 238 | $9,408,973 |
| 25/7 | 1,660 | $65,625,610 | 2,149 | $84,957,492 | -489 | -$19,331,882 |
| Total | 9,229 | $364,854,672 | 9,563 | $378,058,861 | -334 | -$13,204,189 |
*billions
Source: www.hsx.vn
Trade news
Vietnam market-economy review outcome postponed to August
The US Department of Commerce has announced that it will delay publishing the outcome of a review of Vietnam’s status as a non-market economy until August citing the crowdstrike disruption as causing delays, Reuters has reported. The outcome was originally due this Friday.
Of note, Vietnam’s efforts to be redesignated a market economy for trade remedies purposes has been met with quite a bit of resistance in the United States. Its case for a redesignation is also pretty shaky in a few areas, currency convertibility and government ownership, for example. As such it’s not really clear which way the DOC might fall.
See also: Unpacked: Vietnam’s Non-Market Economy Review.
The week ahead
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