Overseas remittances have always played an important role in Vietnam’s economy. The COVID-19 pandemic had a negative impact on this source of money, which has kept the communist authorities from being panicked in recent months.
The number of remittances sent to Vietnam last year amounted to nearly $17 billion, accounting for 6.5% of GDP, of which, Ho Chi Minh City accounts for about $5.3 billion, but this year, the amount of money sent by Vietnamese living abroad to the home country has dropped significantly and is likely to decline sharply because of the coronavirus.
The latest statistics of the HCM City branch of the State Bank of Vietnam (SBV) showed that, as of early June 2020, the amount of remittances of the city reached $2.3 billion, down 1.9% over the same period. In the first 4 months of 2020, remittances transferred to HCM City was only $1.8 billion, down 2% compared to the same period in 2019. In March alone, remittances decreased by 8% due to the disease.
This is the first time remittances have decreased by months in many years. Although in the first quarter of 2020, the decrease in remittance is not strong because the COVID-19 epidemic began to affect strongly from the beginning of the second quarter, but the forecast of remittances may continue to decrease in the coming months.
Some transfer companies confirmed that the amount of foreign currency transferred from abroad through this channel started to decline from April. The representative of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) said the number of remittances transferred through the system. Sacombank in April decreased by 20% compared to the previous month. Sacombank’s representative said: “Remittances start to decline but in each market, there is a different decrease depending on the control of COVID-19 epidemic and the progress of easing social gap for the economic recovery of each country. … “
In an interview with VOA, Ms. Quy Nguyen, owner of a remittance service provider in Vietnam in Washington DC, said her business has been “affected” since the outbreak of the disease in the US, where the highest number of Vietnamese people living outside of Vietnam.
Ms. Quy said: “Normally if a customer goes to work, people will have money to send to relatives in Vietnam. But because now, the pandemic has occurred, people don’t go to work and people have to worry about the cost of this site, so the amount of money sent to help families in Vietnam is reduced. Some get unemployment benefits, but many people don’t get unemployment benefits. Some people have unemployment, people also have to cover life here. Very few people have just sent back to Vietnam. For example, one month, a person can help his family with $500, now it can be $150-$200 only.”
Assoc.Prof.Dr. Dinh Trong Thinh, a senior lecturer of the Academy of Finance stated that in 2020, the number of remittances will decrease significantly.
The reason is that the outbreak of COVID-19 broke out in many countries around the world, especially in countries with many Vietnamese people living and working such as Russia, the US, and France. During the time of social isolation, oversea Vietnamese have health problems and reduced income, so they havs reduced the transfer of remittances to relatives.
Not only that, the COVID-19 disease that breaks out and spread in many countries around the world also significantly affected the labor export activities of Vietnam. The Ministry of Labor, War Invalids and Social Affairs has recently issued a public announcement on strengthening the implementation of urgent measures to prevent and control epidemics in the peak period, which requires the Foreign Labor Administration to direct businesses to halt sending Vietnamese workers to foreign countries until the end of April 30. Therefore, “people do not go, money does not come” is also one of the reasons for the decline in remittances.
In recent years, the number of remittances to our country has increased sharply. In 2019, Vietnam ranked 9th among the countries receiving the most remittances in the world and the third largest remittance receiving country in East Asia and the Pacific.
Remittances are regarded by domestic media as the “lifeblood source” of many households in Vietnam.
The World Bank has just forecast that global remittances will “decrease by about 20%” by 2020, due to the economic crisis stemming from the COVID-19 pandemic, causing many activities to be stagnant.
The international financial institution added that this was “the sharpest decline in recent years, largely due to lower incomes and employment among migrant workers,” which “are vulnerable to job losses and income due to economic crisis in host countries.”
It is predicted that the “inflow” of remittances to low- and middle-income countries is expected to fall by 19.7% to $445 billion, “causing a significant financial loss for many households in difficult circumstances.”
The World Bank says that in East Asia and the Pacific alone, remittance flows will decrease by about 13% by 2020. This organization said that this is “the consequence of the decline of cash flow from the US, the largest source of remittances of this region.”
According to studies, remittances play a role in supporting poverty reduction in low- and middle-income countries, improving nutrition, raising education spending and limiting child labor to households families in difficult circumstances.
The World Bank said that falling remittances “will make it difficult for households to pay for these items because finance will be given priority for food and other essential needs.”
In Vietnam, in the past, remittances were sent to relatives for spending, thereby stimulating consumer demand and production. Recently, remittances have been sent to invest in production and business or converted into Vietnamese dong for savings. This continuous increase of capital over the years has also contributed to help Vietnam increase its supply of foreign currencies and stabilize exchange rates. Therefore, the reduction of remittances will affect private investment, production will decrease, and social spending will also be affected; in general, it has a significant impact on the economy.
The largest international financial institution estimates that by 2021, remittances “flowing” into low- and middle-income countries like Vietnam “will recover and increase by 5.6% to $470 billion.”
In East Asia and Pacific, it is forecasted that remittances will recover and increase by 7.5%. But according to the World Bank, this outlook remains uncertain, depending on the impact of the COVID-19 pandemic on the prospect of global growth and measures to curb the spread of the disease. Because remittances in the past used to tend to be counter-cyclical, meaning that in times of crisis and hardship, workers tended to send more money home.
In particular, this pandemic affects all countries, increasing uncertainty. Therefore, the recovery of remittances depends greatly on the prevention and control of COVID-19 epidemics of countries around the world. After the pandemic ended, countries’ economies were still severely affected. Therefore, in the coming time, if the US and some countries successfully control the pandemic, the business and income of the people also need at least 1-2 years, depending on the depth of the deep or shallow crisis of the economy health can recover.
Elsewhere, the latest annual US report on global financial transparency states that Vietnam has not made progress in disclosing government revenues or information on natural resource exploitation. course.
The State Department’s report released on June 15 shows that Vietnam is not among 76 out of 141 countries assessed to meet the minimum standards of financial transparency.
According to the US Department of State’s global criteria, countries that meet the minimum financial transparency requirements are when their governments make budget documents available to the public within a reasonable time. These documents must be complete and reliable.
The State Department’s report said that although the Vietnamese Government has recently allowed the public to access executive budget proposals and implemented budgets, the Government of Vietnam did not publish year-end reports in a reasonable amount of time. Information on the debts of state-owned enterprises is not public.
Accordingly, although the Government of Vietnam publishes documents on planned expenditures and revenues, it does not make the accounts off-budget transparent.
In addition, although the Government of Vietnam appears to abide by laws and regulations on awarding natural resource exploitation contracts or permits, the basic information about the permission for exploitation of natural resources is essential. In Vietnam, it is not always publicly available.
According to the World Bank, financial transparency is particularly important in Vietnam as the public sector plays a relatively large role in the country’s economy. The bank assessed that Vietnam made significant progress compared to the 1990s in terms of financial transparency.
The US State Department conducts an annual review of the financial transparency of governments around the world that currently receive U.S. financial assistance to help ensure that US’s taxpayer funds are used rationally and also to provide opportunities for dialogue with governments on the importance of financial transparency.