Over $18 billion
The World Bank (WB) and international cooperation organization on migrants KNOMAD forecast the number of remittances to Vietnam in 2021 at $18.1 billion, ranking 8th in the world and 3rd in Asia-Pacific.
The number of remittances increased sharply to a record –
Remittances are one of the major sources of foreign currency each year of Vietnam
In 2020, Vietnam’s remitance was $17.2 billion, ranking 11th in the world. Total remittances to low- and middle-income countries will grow 7.3% to $589 billion in 2021. This recovery is above previous estimates and maintains a solid 2020 trend when remittances only decreased by 1.7% despite the Covid-19 pandemic dragging the world economy into recession. Remittances are forecast to grow by 2.6% in 2022.
The biggest risk to economic growth in general and remittances in particular on a global scale is the rebound in the number of Covid-19 cases and the reinstatement of travel restrictions. Besides, when the economy recovers enough, the end of the stimulus package and the cessation of labor support can also reduce the number of remittances. Thus, the amount of remittances to Vietnam has continuously increased over the past 21 years by more than 13.7 times, in 2000 at $1.32 billion, in 2021 it is estimated to reach $18.1 billion.
Mr. Nguyen Hoang Minh, Deputy Director of the State Bank – Ho Chi Minh City branch, said that the number of remittances to the city in the past 11 months was estimated at $6.2 billion, surpassing the $6.1 billion figure of the whole year of 2020. The remittances are still continuing to return, so it is expected that in 2021, the city will receive about $6.5 – $6.6 billion. Thus, in just the past 2 months, remittances transferred to Ho Chi Minh City increased by about $1 billion, this growth is quite unexpected during the recent outbreak of the epidemic. The main source of remittances is from traditional markets such as the US, Australia, Canada, and Europe.
The reason for the sharp increase in remittances this year, according to Mr. Minh, is that the city has implemented social distancing to prevent the Covid-19 epidemic, so people abroad have transferred money to support their relatives. Regarding the structure of remittances flowing into which areas, there are no complete statistics like in previous years, but the rate of social security support has increased compared to before, the rest is in investment, production, and business.
It is forecasted that in 2022, Vietnam’s economic growth will be more prosperous, GDP will increase by 6.5 – 6.8%. At this time, it is forecast that the remittance cash flow will shift more into the production and business sector.
Mr. Ha Ton Vinh
In addition, remittances repatriated to the country are said to flow into investment channels such as securities. Ms. Thu Hien (living in Binh Thanh District, Ho Chi Minh City) said that at the end of October, her biological sister in the US called to ask Ms. Hien to go to a securities company to open a trading account. The amount transferred to the initial investment is equivalent to VND500 million. A number of companies operating in the field of remittances said that the increase in the number of remittances in recent months is partly due to the development of increasingly diverse products and services, along with the cost of remittances in the country more reasonable level than before.
The Covid-19 epidemic caused the flow of remittances to increase
Explaining the economic difficulties of many countries due to the Covid-19 epidemic, the unemployment rate increased, but remittances to Vietnam increased, said Tran Thanh Hai, Rector of Vien Dong College, said among the economic support packages of North American and European countries, there is a social security support package, some countries pay $400-$600/person/week to the account for unemployed people. Many people do nothing but receive up to $2,000 per month. Moreover, the recent epidemic situation in Ho Chi Minh City was quite complicated, causing many expatriates to accumulate and send more money to their relatives.
Sharing the same opinion, Professor Ha Ton Vinh, President and General Director of Stellar Management, an international education, training, and consulting company, analyzed the recent increase in remittances to Vietnam, which also has reasons related to the Covid-19 epidemic. -19. With the current outbreak of epidemics in European countries and the US, expatriates, as well as overseas workers, are afraid of unforeseen events, so they have money to move back home. In addition, every year, the number of overseas Vietnamese returning home to visit relatives and traveling is very high. Now, due to the epidemic, they cannot return and they send more or less the accumulated money back home.
Usually, at the end of the year, the cash flow in the market transferred into production and business activities will increase to prepare for festivals, especially Tet. However, with the current developments of the Covid-19 epidemic in the country, consumer psychology is still more defensive. They are not really secure in spending, so production and business activities are still exploratory. This may also be the reason why remittances have not flowed strongly into the production and business sector. In 2022, when the Covid-19 epidemic is under control, business activities flourish, which will attract more remittances to this channel.
As countries launched huge economic stimulus packages with low-interest rates, will this capital flow to Vietnam or not? Mr. Ha Ton Vinh said that for overseas Vietnamese who receive subsidies from the host country’s government but do not use them all, they can switch back to support their relatives. As for those who borrow from banks with cheap capital, it is also good to be able to somehow transfer some of their capital to domestic investment. Currently, the savings deposit interest rate in Vietnam is around 5-6%/year, although it has decreased compared to before, it is higher than in foreign countries. Sending money back home is both high interest and safer. The current stock market is also an attractive channel for this capital, but it requires players to be knowledgeable, so it can be said that anyone who likes to take risks will not ignore this channel.