What’s next for remittances to Vietnam?
Global economic and political conditions cast doubt on the inflows, which have been an important source of capital for Vietnam.
Vietnam is still in the list of top remittance recipients, but experts are uncertain about the future considering recent economic and political developments in the world.
According to World Bank’s estimates, during 2016, Vietnam received around $13.4 billion from overseas, up 3 percent from 2015.
The Washington-based bank noted that remittances to developing countries, in general, fell for a second consecutive year in 2016, a trend not seen in three decades.
For Vietnam, over the past 25 years, the flow of overseas funds has increased around 100-fold, from $140 million in 1993 to approximately $13.4 billion in 2016, according to latest data released in May by the World Bank.
Last year, remittances made up for 6.7 percent of the country’s gross domestic product.
The U.S. has been the largest source of remittances for Vietnam, accounting for around 60 percent of all remittance inflows last year, as calculated by us based on several estimates.
But there are uncertainties ahead. Credit Suisse, in its report released in March this year, warned of a possible slowdown in 2017, given global economic and tighter border controls imposed by the Trump administration.
Analysts said remittances could be affected by the recent hike in interest rates in the U.S., which means senders can earn good profits by keeping money in the U.S.
In recent years, the purpose of using remittances shifts from family support to business investments, real estate and savings, Atish Shrestha, the regional director for Cambodia, Laos and Vietnam at Western Union, told via email.
As such, the logic of holding on to their money makes sense, Shrestha said.
He added that while economic and political conditions in the send countries may weaken remittance inflows to Vietnam, the growing number of Vietnamese migrants working abroad may help to offset these effects.
In 2016, the number of Vietnamese who went to work abroad hit 126,300, exceeding the projection by over 26 percent, and up nearly 10 percent from the previous year, according to the Department of Overseas Labor.
Vietnam’s major source of remittances, aside from North America, are Australia and European countries, according to Western Union.