[Vnbiz] EIU Currency Forecast

[Craig Stevenson]

Vietnam: Currency forecast
   September 22nd 2006 |
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   COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

These forecasts were prepared on September 4, 2006
    2006 2007 2008 2009 2010 D:US$ (av) 16,037 16,410 16,850 17,250
17,650 Nominal
appreciation of D (%) -1.1 -2.3 -2.6 -2.3 -2.3 Real appreciation of D (%)
3.6 0.6 -0.7 -1.2 -1.4 D:US$ (end period) 16,174 16,630 17,050 17,450 17,850

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    2006 2007 2008 2009 2010 D:€ (av) 20,130 22,359 22,537 22,296
22,239 Nominal
appreciation of D (%) -1.9 -10.0 -0.8 1.1 0.3 Real appreciation of D (%) 3.1
-7.0 2.2 3.3 2.1 D:€ (end period) 21,106 22,783 22,421 22,074 22,531

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    2006 2007 2008 2009 2010 D:¥100 (av) 14,750 15,265 15,896 16,429
16,971 Nominal
appreciation of D (%) -7.3 -3.4 -4.0 -3.2 -3.2 Real appreciation of D (%) -
0.2 1.7 0.1 -0.1 -0.7 D:¥100 (end period) 14,906 15,615 16,161 16,699 17,163

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    2006 2007 2008 2009 2010 Real effective exchange rate (1997=100) 87.1
86.4 89.9 92.0 88.3

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PREVIOUS AVAILABLE SIX MONTHS
    2005   2006         Nov Dec Jan Feb Mar Apr D:US$ (av) 194.7 195.1 195.6
196.1 196.3 196.5

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CURRENCY ANALYSIS

The authorities are expected to continue to manage the exchange rate tightly
throughout the forecast period. The dong will depreciate steadily against
the US dollar in 2006-07 as a result of the country's high rate of inflation
(at least in 2006) as well as the government's desire to maintain
export-competitiveness. In real effective terms, however, the currency will
appreciate slightly in 2006, before depreciating in 2007. Given that we
forecast a weaker US dollar over the forecast period, the dong will
depreciate more rapidly against the yen and the euro than it will against
the dollar. In 2007 the dong is forecast to average D16,410:US$1, compared
with an average of D15,859:US$1 in 2005.

GLOBAL EXCHANGE RATE ASSUMPTIONS - 13 Sep 2006
    2006 2007 2008 2009 2010 ¥:US$ (av) 115.1 102.3 97.5 95.5 93.5 US$:€
(av) 1.26 1.36 1.34 1.29 1.26 ¥:€ (av)
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