Why is the Vietnam Currency So Weak? Unravelling the Fascinating Facts Behind the Economic Struggles

Vietnam is a very popular destination in the Southeast Asian Region that brings passionate travellers from across the globe. Interestingly, Indian travellers find it quite convenient to travel to this beautiful country, which has been one of the most sought-after. However, one thing that caught our attention was the Vietnam Currency. The currency of Vietnam is the “Vietnamese Dong“.

The Vietnamese dong (VND) is relatively weak as compared to other major currencies. Understanding why requires delving into Vietnam’s economic history, its current economic policies, and a variety of external factors. In this blog post, you will find out some fascinating facts about Dong’s weaknesses.

Turn Back the Pages in the Evolution of Vietnam Currency

Vietnam’s economy was challenging in the past, especially due to the Civil War, which devastated the country’s infrastructure and economy. Soon after the war, the period was marked by central planning and state control, thereby leading to inefficiencies and economic stagnation.

There were reforms and growth in 1986. The introduction of the Doi Moi marked a significant transition towards a market-oriented economy. These reforms have driven substantial economic growth, but Vietnam’s started slowly. The dong could not fully regain its value compared to stronger, more established currencies such as US Dollar and Euro.

Economic Factors

An obvious reason that might come to your mind is the “inflation“. This has been one of the primary reasons for the weakness of the Vietnam Currency. High inflation rates erode the purchasing power of a currency. Although Vietnam has been trying hard to control inflation in recent years, the legacy of past high inflation rates continues to impact the Vietnam Currency’s value.

Trade also plays a pivotal role. The country has become a significant exporter, particularly in electronics, garments, and agricultural segments. However, Vietnam imports a lot of raw materials and machinery. This trade balance can put pressure on the currency, especially if imports outpace exports.

Apart from the historical and economic issues, there are issues in the…….

Government Policies

The State Bank of Vietnam (SBV) manages the dong’s exchange rate, often keeping it at a lower value to make Vietnamese exports more competitive on the global market. This policy helps boost the export sector but also means the currency remains weak compared to its counterparts.

The most important one…….

Foreign Exchange Reserves

Vietnam has been building its foreign exchange reserves, which are still relatively modest compared to major European and North American economies. Higher reserves can help stabilize a currency, but with limited reserves, it is quite obvious the dong is more susceptible to fluctuations.

The aforesaid points were more of internal issues, you might be amazed to know that there were many……..

External Factors

Vietnam attracts significant Foreign Direct Investment (FDI), which brings in foreign currency and can help support the dong. However, these investments also mean that profits are often repatriated, which can lead to outflows of foreign currency, putting downward pressure on the dong.

Yes, there were global economic circumstances that affected the dong. Key issues such as U.S. interest rates, global trade tensions, and economic slowdowns in major economies can lead to capital flight from emerging markets like Vietnam, thereby weakening the dong.

Nevertheless, issues related to the banking system also turned the tables against the Vietnam Currency.

Lastly, let’s compare the Vietnam Currency…….

Comparing the Vietnamese Dong with INR and USD

When travelling to Vietnam, it’s essential to understand the exchange rates and currency values, which are crucial for finalizing the budget. Here’s a comparison of the Vietnamese Dong with the Indian Rupee (INR) and the US Dollar (USD) as of 08/06/2024:

(Note: Exchange rates fluctuate, so it’s advisable to check the latest rates before any currency exchange.)

We will again advise you to carry US Dollars while travelling across Vietnam. The reason being its wide acceptance and better exchange rates.

Hope you got to know some fascinating facts about the Vietnam Currency. For any queries, we are just a click away.

Wait! We are not going anywhere without this last question……    

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Let us inform you that we prepare itineraries not only for anywhere in India but also for Asia. We have been travelling since we were toddlers. So here in our blogs and stories, we will give you a glimpse of our journey and help you plan your trip.

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by mitkau

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