France’s Bouchet: SBV on the right track (BANKING TIMES-VIETNAM)

Professor Michel Henry Bouchet, an experienced French expert in international banking and especially in country risk assessment, has lauded the latest moves taken by the State Bank of Vietnam (SBV) to cope with outstanding economic problems.

Michel Henry Bouchet

At a conference on Corporate Management of Foreign Exchange organized by CFVG management school and the French Chamber of Commerce and Industry in HCMC last week, Bouchet said the central bank’s measures had helped cut excessive consumption, reduce money secretion, stabilize the gold price, and encourage people to shift from depositing the dollar to dong.

He, however, said the measures had yet to tackle the root cause of the overheating economy in Vietnam. “Because the root, the overheating economy, comes from a long time ago, from the last five years. When you had credit growth from 25% to 28% per year, you have to deal with excess money supply on Monday in Vietnam. So the central bank’s current regulations are a good signal that it is tackling the problem but that will take time to produce results,” he said.

Speaking to local media on the sidelines of the conference, Professor Bouchet said foreign exchange management was one of the policy tools that the central bank could use but it was not enough to fix the dong shrinkage. “You have to decrease the pressure on the dong and the pressure of the dong comes from basically excessive demand in the economy. Rising inflation is putting pressure on the exchange rate.”

That Vietnam has recently been downgraded by international credit ratings agencies will leave an impact on foreign institutional investors because they heed their project analysis and the country’s perception by the rating agencies as well, he said.

According to Bouchet, the IMF and the World Bank’s view of Vietnam’s macro economy by the end of last year was fragile market stability due to confusion over the Government’s policy intensions, increased macro economy risks given credit boom and asset price bubble, high inflation, downward pressure on the local currency, and deteriorating debt profile.

Vietnam’s long-term challenges, he noted, will require immediate policy actions of mobilizing long-term financing for current accounts, sharing more equitably social benefits of economic growth, and improving transparency and governance.

Bouchet is head of SKEMA Business School’s Global Finance Center, and strategy director of North Sea Global Equity Management Fund. He has strong previous experiences at France’s Prime Minister Office, the World Bank, and the Institute of International Finance in Washington D.C.