Dong to weaken in next 12 months: UOB forecast

The exchange rate has shown signs of cooling this week, but UOB said the situation could reverse in the medium and long terms.

In a recent note it listed two factors that could cause the dong to depreciate in the next 12 months: rising U.S. interest rates which are strengthening the dollar and a China slowdown.

At state-owned Vietcombank, on Oct.5 the dollar selling rate fell by VND10, a third straight day of losses, to VND24,020.

Eximbank sold the dollar at VND24,000, and forecast the dong to weaken to VND24,100 by next quarter and VND24,300 by the third quarter of 2023.

UOB said growth momentum remains intact across Vietnam’s economy, particularly in retail and tourism, which continue to be supported by the easing of Covid restrictions.

It has raised its forecast for this year’s GDP growth to 8.2% from the earlier 7%.

But it cut the 2023 forecast to 6.6% from 7.0% saying there are several external risks like the Russia-Ukraine conflict and its impact on energy, food and commodity prices; global supply chain disruptions; and global monetary policy tightening amid recession in the US and Europe, which account for 41% of Vietnam’s exports.