US Treasury retains Vietnam on ‘monitoring list’ for currency management

Vietnam, a major trading partner, remains on the U.S. Treasury Department’s “monitoring list,” the department has affirmed in its November 2024 report to the Congress.

The monitoring list is a list of major trading partners with the U.S., whose currency practices and macroeconomic policies “merit close attention,” the department said.

In the latest edition, the department’s list features mainland China, Japan, South Korea, Taiwan, Singapore, Vietnam, and Germany. South Korea is the only addition from the June 2024 edition, while Malaysia has been removed from the list.

Vietnam meets the criteria for having a significant bilateral trade surplus with the United States and a material current account surplus, the report says.

Vietnam had exceeded limits in the two criteria in the department’s June 2024 report. Prior to that report, the country had met one criterion (significant bilateral trade surplus) under the 2015 Act in every report since the June 2022 report.

Vietnam’s current account surplus stands at 5% of GDP over the four quarters through June 2024. The goods trade balance increased 8.6% over the report period as overseas demand for factory goods recovered.

The current account surplus has also been supported by increased remittances even as net services incomes remain below pre-pandemic levels and corporate profit repatriation has slightly increased, the report says.

Vietnam’s bilateral trade surplus with the United States has expanded dramatically over the past six years, primarily driven by growth in goods trade, led by electronics and machinery. The bilateral goods and services surplus was $111.7 billion over the four quarters through June 2024.

Net sales of foreign exchange in Vietnam from July 2023 to June 2024 amounted to 1.5% of GDP, the report notes.

The department estimates Vietnam’s foreign exchange reserves at $84.1 billion as of end June 2024, down by $5.1 billion in a year. The country’s foreign exchange reserves were equivalent to 19% of GDP.

Vietnam continues to have the third-largest goods surplus with the United States, the report says.

It also notes that Vietnam, along with many other economies, has “broadly ample-, or more than ample-, foreign exchange reserves based on standard adequacy benchmarks.”

Such reserves are more than sufficient to cover short-term external liabilities and anticipated import costs, the report adds.