Exchange rate impact on textile and apparel businesses will lessen in the second half of 2024.
Textile and apparel businesses are encouraged to keep a careful eye on market developments in order to react effectively, even if exchange rate pressures are anticipated to lessen in the second half of the year.
The Vietnam National Textile and Garment Group conducted an analysis that shows that as of June 4, 2024, the interbank USD/VND exchange rate had increased by about 4.86% over the same period, while the USD/VND exchange rate listed by commercial banks had increased by 3.97%. The recent depreciation of the Vietnamese dong is minimal when compared to other nations in the area and the world.
The pressure from the Dollar Index is also anticipated to lessen as projections indicate that the U.S. Federal Reserve (Fed) may lower interest rates sooner than anticipated. The USD/VND exchange rate is anticipated to have less upward pressure in conjunction with steady expansion in the domestic trade balance. It is anticipated that the USD/VND exchange rate would rise by almost 1% by the end of 2024, ranging between 25,700 and 25,800 VND.
Furthermore, it is anticipated that the currencies of nations like Bangladesh, Mexico, Turkey, and Indonesia—all of which are direct rivals of Vietnam in the export of textiles and clothing—will weaken considerably in value relative to the Vietnamese dong, especially in the situations of Bangladesh and Mexico. When compared to Vietnam, this significantly raises the competitiveness of their textile and apparel exports.
According to experts, deposit rates have reached their lowest point and are starting to rise in relation to the Vietnamese dong interest rates by the end of 2024. Although credit for the economy has begun to recover, it is predicted that deposit rates in VND will continue to rise until July or August 2024 as a result of the negative 0.3% growth in total system capital mobilization since the year began. It is anticipated that the average deposit interest rate will stay in the range of 6.5% to 6.8%.
Credit growth was nevertheless comparatively modest in the first five months of the year, rising by only over 3%. The economy's loan interest rates are remain high overall, but by August 2024, they should drop by about 1% to 1.5%. Only in early September 2024 are loan rates expected to start increasing once more.
The fact that domestic consumer demand has grown more slowly in the first few months of this year than it did in 2023 and the 2015–2019 period is one area that needs attention, according to Dr. Tran Van, a former deputy chairman of the National Assembly's finance and budget committee. In the meantime, pressure from competitors is growing in both export and domestic markets. Furthermore, the global financial and monetary markets are expected to exert pressure on the exchange rate, leading to an upward trend in the USD selling rate at commercial banks, potentially breaking the psychological threshold of 25,000 VND/USD.
Conclusion
Therefore, it is imperative that enterprises and policymakers continuously monitor, fully comprehend the situation, analyze, forecast, and clearly identify difficulties in order to respond flexibly and proactively.
This strategy also demonstrates how each company can take the initiative to overcome obstacles and contribute significantly and successfully to the process of economic restructuring by lining up with new business models, growth model innovations, and the creation of a green and circular economy.g for producing garment actories in Vietnam, VinMake has delivered millions of fashion products for global brands.
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