Due to the blow to the hike rate strategy of the Federal Reserve , Vietnam's finance and economy have experienced great difficulties.
Since the beginning of this year, the Vietnamese Ho Chi Minh Index has fallen from more than 1,500 points at its high level to the current 1,050 points. In more than half a year, Vietnam's stock market has fallen by 32%, nearly one-third missing.
In the past two days, Vietnamese Dong 's exchange rate against the US dollar plummeted again, setting a record low.
At the same time, in the past few years, the manufacturing industry on which the Vietnamese government relied on was suddenly pressed, and there were still orders at the beginning of the year, but now there is a shortage of orders.
Can the Vietnamese economy escape the disaster in the face of the US dollar?
01
At present, the inflation in the United States has not changed much, and there is even a possibility of a rebound.
At the end of September, when the United States announced the PCE price index, we found a rebound compared with last month.
Then the CPI released this month was not as expected, especially after removing food and energy factors, the core PCI rebounded significantly.
In the past, the United States has been blaming the rise in inflation on the rise in international energy prices and the continuous rise in food prices as commodity . However, even if these two factors are removed, core inflation still rises, which means that inflation has spread across the board.
At the same time, the overheating of the US economy does not seem to have changed much, the employment situation is still very high, and the unemployment rate is a new low in the past five years, which also gives the Federal Reserve confidence and reason to raise interest rates further.
Previously, the market predicted that in November and December, there would be a 75 basis points and 50 basis points rate hikes respectively, but the current forecasts have become more diversified. It is believed that the rate hikes may be larger, and the cumulative rate hikes in November and the end of December may reach 150 basis points.
02
In this case, Vietnam, which used to rely on high debt in exchange for economic development, will face a heavy crisis.
Since the subprime mortgage crisis in 2008, the United States has been accustomed to issuing large amounts of bonds to transfer the economic crisis it faces to abroad.
Especially after the outbreak of the new crown epidemic in 2020, the Federal Reserve's balance sheet even doubled in just over two years. Meanwhile, the Federal Reserve also purchased 40% of the newly issued Treasury bonds by the U.S. Treasury Department. Over-issued currencies continue to flow to other markets, especially emerging markets.
Vietnam has also gained considerable benefits in this process. It is precisely because it depends on the continuous inflow of funds that Vietnam's manufacturing industry and Vietnam's GDP have achieved rapid growth in recent years.
With the help of funds, Vietnam has continuously snatched a large number of orders in the international market. At the beginning of this year, Vietnamese people proudly said that they had too many orders and couldn't finish them, so they had to recruit a large number of jobs.
Vietnamese media also listed data for comparison, pointing out that Vietnam's export volume exceeded Shenzhen.
However, half a year later, a large number of workers in Vietnam were unemployed and the orders disappeared.
But at the same time, Vietnam's debt level is also increasing. Currently, the foreign debt of Vietnam has reached US$175 billion, but Vietnam's foreign exchange reserve has decreased, so the proportion of foreign debt is equivalent to foreign reserves, which has further increased to more than 170.
If compared with Vietnam's GDP, although Vietnam's GDP has grown well in recent years, Vietnam's debt growth rate is faster. Therefore, Vietnam's total debt is equivalent to the proportion of the country's GDP, increasingly close to the warning line of 65%.
03
Using debt to obtain funds to develop the economy is a common choice for many emerging markets. However, once debt is too high, especially in the trend of the dollar's growing stronger, the economy may collapse under pressure.
As the exchange rate of the US dollar becomes higher and higher, the exchange rate of the Vietnamese Dong continues to fall, which means that in the future, Vietnam faces increasingly higher debt repayment costs.
But at this time, the Vietnamese central bank announced that it would expand the volatility range of the Vietnamese dong to 5%, which means that it has a looser attitude towards depreciation, which seems to mean that the Vietnamese central bank is unable to prevent the depreciation of the Vietnamese dong. Therefore, the market's expectations for the Vietnamese dong to continue to depreciate significantly are getting stronger and stronger.
In the first half of this year, Vietnam's foreign exchange reserves have dropped to US$101.4 billion, the lowest level in the past 12 years.
With the previous trade surplus, it gradually became trade deficit . At the same time, non-US currencies are constantly depreciating. Vietnam's foreign exchange reserves will continue to shrink in the future.
In this case, Vietnam does not have enough strength to maintain the exchange rate of the Vietnamese Dong.
In this case, does Vietnam still have the ability to "grab" more production orders?
