Prices of many imported goods, including fuel and smartphones, are poised to surge in Vietnam under the impacts of the domestic currency’s devaluation against the U.S. dollar.
The dollar has recently surged to a 20-year high and sent currencies worldwide tumbling, as the U.S. Federal Reserve keeps hiking interest rates to control inflation while geopolitical tensions like the Russia-Ukraine crisis show no signs of ending.
Vietnam’s state-owned lender Vietcombank sold the dollar at VND24,885 on Monday morning, VND655 higher week on week.
Many business sectors have fallen victim to the strong dollar.
In the fuel sector, the import price of liquefied petroleum gas (LPG), or cooking gas, climbed by VND8,000 ($0.32) per 12kg cylinder, according to Le Quang Tuan, deputy director of Pacific Petroleum Trading Joint Stock Company.
Some importers are suffering losses of up to billions of dong, Tuan said.
Although global LPG price is forecast to drop by $10 per metric ton in November, the decline will not be enough to compensate for the higher dollar price.
As a result, the Southeast Asian country will see the domestic cooking gas price increase by VND5,000 ($0.2) per 12kg cylinder next month.
The situation is even worse for petrol importers, whose payment deadline for the early October shipments is approaching.
As they sold out petrol imported at a low dollar price level, they now have to take out bank loans to pay for foreign sellers at higher costs.
Under this pressure, the importers are likely to hike petrol retail prices in the coming days, a leader of a fuel wholesale firm said.
Several other consumer goods are also subject to upward price adjustments.
Anh Hong, marketing director of the 24hStore smartphone retailer, said that to import a phone shipment costing $300,000, the firm now has to spend VND7.3-7.5 billion, instead of less than VND7 billion like before.
As a result, 24hStore is likely to increase the prices of its smartphones, laptops, and tablets in the near future when new imports arrive.
Travel companies in the country are concerned that the stronger dollar will eat into their profits this year or even cause them to suffer a loss.
Vietnam requires tour operators to list tour prices in dong, but they pay for accommodations and services in dollars, which means they have to bear the brunt of the dollar shock, according to Nguyen Huu Loc, a sales employee at Golden Smile Travel Company.
While the greenback continues to rise, travel companies must stick to the prices they have listed or offered to customers.
“The current situation has made many businesses hesitate to promote outbound tours for Tet [the Vietnamese Lunar New Year holiday that will begin in the latter half of January next year],” Loc said, adding that the profit of many tours is likely to be less than 10 percent.
Some firms have no other choice but to reduce promotions.
The appreciating dollar is also putting new pressure on Vietnamese airlines, driving up the cost of everything from the jet fuel to the aircraft rent, according to a carrier representative.
This is a challenge for airlines who are recovering from the COVID-19 pandemic, as they mostly earn in Vietnamese dong but pay many operation costs in dollars.
It means passengers may see disadvantages as the carriers try to pass the bucket to customers through ticket prices, which have already soared after two years of border restrictions.