[NEWS] - The euro depreciates sharply, how does it affect Vietnamese businesses?

The euro depreciated sharply against the USD, to a 20-year low. According to the Ministry of Industry and Trade, in the short term, the devaluation of the euro may have certain effects on some Vietnamese import-export enterprises that have contracts for payment in euros.

In a just-released report, analysts at the MSB-Banking Center for Economic Research said that from the beginning of the year to July 15, the euro had fallen by more than 11% against the dollar, to roughly equivalent to USD. Experts believe that the main reason for the weakening of the euro is concerns about the risk of an energy crisis in Europe, especially when the Nord Stream 1 pipeline brings Gas from Russia to Europe began to be suspended from July 11 for routine maintenance.

How are Vietnamese businesses affected?

The above context puts the European Central Bank in a difficult position when it has to try to control inflation while also supporting a slowing economy, with a plan to raise borrowing interest rates for the first time since last year. 2011. According to the Ministry of Industry and Trade, in the short term, the devaluation of the euro may have certain effects on some Vietnamese import-export enterprises that have contracts for payment in euros.

For exporters, the same amount of euros earns less in local currency, which will affect profits. However, according to experts’ calculations, the proportion of using euro for payment with businesses in the Asia-Pacific region, including Vietnam, is currently at 5-7%; while using USD accounts for 65-70%. Currently, only about 15-20% of Vietnamese import-export enterprises sign payment contracts in euros, the rest is mainly in USD, so the damage is significantly minimized.

In the opposite direction, enterprises importing goods from the EU will be cheaper, so the import will be more profitable. Although the import turnover from this region is not large, it is essential for production, especially machinery, equipment and some strategic materials, so it can be considered a credit. positive effect.

In the long run, the weak domestic currency drives up inflation in the EU, and imported goods become more expensive. Weak purchasing power makes EU consumers able to limit spending, especially on non-essential goods. This can reduce the demand for imported goods from markets, including Vietnam.

Therefore, the price of Vietnamese products exported to Europe in many industries may become higher, affecting the competitiveness of Vietnamese products in this market. Europe is Vietnam’s second largest import market, after the US, which is likely to reduce Vietnam’s overall export turnover.

In the first 6 months, the leather and footwear industry’s exports reached about 13 billion USD and grew by 13%; The proportion of exports to the EU market accounts for about 30% of the total export turnover of the whole industry.

However, some other export products, such as handicrafts, are not so. Paying the contract in euros and signing the price agreement from the beginning of the year, the depreciation of this currency has caused business losses. The same situation also happened with some enterprises exporting agricultural products when they signed with EU importers orders from the beginning of the year in euros…

To minimize damage from exchange rate fluctuations, state management agencies as well as experts advise businesses, when signing import-export contracts in the context of complicated fluctuations in international currencies, Enterprises should consider solutions to prevent exchange rate risks, and at the same time strengthen trade promotion activities to promote Vietnamese products, expand and diversify markets, and take advantage of trade agreements. signed freedoms, especially EVFTA.

Making the most of the solution to minimize exchange rate risks and increase trade promotion activities, Indochina Holdings provides trade promotion services and capital consulting. With many years of experience in consulting for many businesses and members here, we keep the motto of being a commercial bridge between domestic and foreign enterprises with accurate information. Create many opportunities for sustainable and long-term cooperation.

Cao Duy