Fed raises basic interest rate, how is Vietnam’s exports?

Mr. Tran Thanh Hai – economist, Chairman of the Board of Directors of Buon Ma Thuot Coffee and Commodity Exchange Joint Stock Company – acknowledged the above when talking to a reporter of Nguoi Lao Dong Newspaper about the Federal Reserve The US (Fed) announced that it would not raise interest rates at its meeting in May.

Reporter: On May 3, the FED raised the basic interest rate to 5% – 5.25%, bringing the US interest rate to the highest level in 15 years. How will this decision affect Vietnam in the last 6 months of 2023, sir?

– Mr. Tran Thanh Hai: With the Fed raising the reference interest rate to 5% – 5.25% and signaling that it will not raise interest rates in June, 2023, US consumers and businesses are likely to find a credit package. suitable for investment in production or consumer loans at a relatively high level, from 6% – 8%.

The US is one of the important markets, annually importing tens of billions of dollars from Vietnam. Currently, US consumers are tightening their spending, along with supply chain disruptions, rising commodity prices… causing imports from Vietnam to drop sharply by 11.8%. According to the General Statistics Office, Vietnam’s import and export turnover in the first four months of the year decreased. Besides the single bright spot from coffee, the rest, many key export industries such as processing industry, agriculture, forestry and fishery… of Vietnam are facing difficulties due to the decrease in purchasing power.

From March 2022 to May 2023, the FED raised interest rates 10 times, from the reference rate of just over 1% to 5% – 5.25%. In my opinion, by the end of 2023, it is unlikely that the Fed will lower interest rates. Besides the adjustment of the Fed, the European Central Bank (ECB) has also raised the reference interest rate. It can be said that the 10th Fed rate hike and the ECB’s reference rate increase will make it more difficult for Vietnamese businesses to find orders in these two major and key markets.

Vietnamese agricultural product exporters are trying to maintain orders in the context that purchasing power in many markets is still on the decline Photo: Thanh Nhan

* Thus, Vietnamese enterprises must prepare to continue “living together” with the tightening of consumer spending in key export markets?

– Yes! In the context of rising prices, consumers tighten their spending, the input costs of exporting enterprises may be high, leading to the possibility of enterprises narrowing the market.

To improve the situation, in my opinion, first of all, businesses need to have a close relationship with banks, clearly demonstrate their ability to preserve export markets to mobilize banks to accompany them to have money in the future. More than ever, at this stage, enterprises must go deep into quality; perform conversions; make full use of state funds for science and technology from bilateral relations poured into Vietnam by other countries through programs of the Ministry of Planning and Investment, the Ministry of Industry and Trade, the Ministry of Agriculture and Development, and the Ministry of Agriculture and Rural Development. rural development. In addition to credit funds from commercial banks, businesses also need to take advantage of the policies of the State Bank and the Government to support digital transformation and convert the use of clean energy and organic standards in products. Agriculture forestry seafood…

In order to boost exports, it is not only necessary to improve in capital and technology but also in direct production, economic communication, foreign relations, etc. Qualified and high-quality human resources need to be focused. because businesses can not do aggressively but in the end only because of errors in packaging, product codes … that affect the evaluation of goods quality.

* In the context of surrounding difficulties, in your opinion, what should the state do to support export enterprises?

– First of all, the export of enterprises in a country, the internal factors of each enterprise related to macroeconomic policy are also very important. First, if we look closely at the Fed’s chart, the exchange rate chart of Vietnam and the USD from 2022 to now, we see some outstanding problems. From March to early December 2022, the VND – USD exchange rate decreased by 5.8%. However, from the beginning of 2023 to May 2023, the exchange rate increased to 3.16%. This change has been and is directly affecting import and export. Since the beginning of the year, VND has increased in value by 3.16%.

Therefore, although the State Bank has made some adjustments to reduce interest rates to pump money out, and at the same time pull the exchange rate up again to stimulate exports, I suggest that it is necessary to be more drastic in the exchange rate policy. . The VND is likely to still be in the inflation controllable band, so it should continue to widen the band to stimulate exports.

In addition to monetary policy on the exchange rate, fiscal policy is also very important, helping businesses expand output in both domestic and neighboring markets. In which, it is necessary to promote the exploitation of the domestic market of 100 million people. Due to the disruption of the global supply chain, the markets of Northeast Asia, Australia and Southeast Asia, and China are opening up opportunities for Vietnam to export at a cheaper cost than exporting to the US and Europe. Credit policy at this time is absolutely necessary to reduce capital costs for exporting enterprises.

In addition, it is necessary to promote the role of domestic ministries and branches and trade at embassies and consulates abroad in trade promotion, helping businesses approach customers. In short, changing institutions in the process of macroeconomic management and supporting businesses is very important in the current conditions.