Workers produce wood products for exports at Woodsland Company in the northern province of Tuyen Quang. (Photo: VNA) Phan Minh Hoa, an economics lecturer at RMIT University, recommended themeasures as local firms have started to suffer from headwinds of thesignificant fluctuations in the US dollar, the euro and Japanese yen on theirproduction and business performance.
The dollar has this year strengthened sharply against the euro and the Japaneseyen as US Federal Reserve has raised interest rates to curb the 40-year highinflation.
While the euro plunged below parity with the dollar last month – a 20-year low,the yen also hit its lowest level against the dollar in 24 years in June 2022.
The Vietnamese dong has so far depreciated by some 2% against the dollar and isforecast to depreciate below 3% in 2022, according to VNDirect SecuritiesCompany.
"In theory, the appreciation of the US dollar can increase export revenue,and the exporters can benefit when converted to dong, but in fact, theexporters also have to pay higher costs for imported materials as well aslogistics and warehousing fees," finance and banking experts Can Van Luctold Viet Nam News.
“Export prices only increased by 9% on average, while import prices increasedby 11%,” Lực explained, adding that many importers of Vietnamese goods askedVietnamese exporters to reduce their prices.
Besides, as most currencies, including the yen and the euro, have weakenedsignificantly against the dollar, demand for import goods from the Japanese andEuropean markets has declined, negatively affecting Vietnamese exports,according to Luc.
Kim Thu, a representative of the Vietnam Association of Seafood Exporters andProducers, said the strong depreciation of the Japanese yen against the USdollar had caused Japanese importers to suggest renegotiating import prices tocompensate for their losses when the yen weakened.
In addition, some Japanese importers, who have already signed import contracts,have requested to negotiate to receive the goods slower from three to fivemonths to wait for consumers to get used to the new prices.
Due to heavy losses when the local currency depreciates, Japanese importerswere adjusting their import plans and demands, Thu said.
According to Thu, although Vietnamese exporters were not affected too much dueto the depreciation of the yen and the euro because most of their import andexport transactions were in US dollars, they have been affected by decreasingimport demands as profits of the importers reduced.
Besides, when the yen and the euro weaken, imported goods become moreexpensive. At that time, Japanese and European consumers chose essential itemsat affordable prices, which reduced consumption demands.
Vo Van Phuc, General Director of Vietnam Clean Seafood Joint Stock Company,said the purchasing power of consumers had decreased significantly, and seafoodexports had faced difficulties since August 2022.
Besides choosing ex-import markets and payment currencies, Hoa said, to hedgeagainst exchange rate risks, local firms should choose banks with good tradefinance ability and use derivative financial instruments such as foreigncurrency futures and swaps.
In the long term, firms would need to increase the competitiveness of exportedgoods and make a difference in their products.
Exporters, who are currently using many imported materials companies, should belooking for alternative material resources, especially domestic ones, to reducedependence on imports gradually, Hoa suggested.
In addition, Hoa said, policymakers must also ensure a balance between economicgrowth goals and inflation control.
He explained if the dong depreciated too quickly, the cost of importing rawmaterials and inflation would increase and affect production. In addition,there was an increased foreign debt burden or the risk of being considered bythe US for currency manipulation.
On the contrary, if the exchange rate was too restrained, while currencies ofother countries had depreciated, export goods would also lose theircompetitiveness, Hoa said./.
VNA
