Vietnam faces challenges to realize growth target

Vietnam needs to pay special attention to the risk of imported inflation as the current low inflation in the country is partly due to low consumer demand.

As Vietnam is forecast to face some risks affecting economic growth in 2022, economic experts gave relevant policy recommendations about inflation pressure as well as support packages for local businesses in the context of Vietnam’s economic recovery.

At the workshop, entitled Assessment of Vietnam’s Economic Recovery and Policy Implication in the “New Normal”, held on April 27, Dr. Tran Toan Thang from the National Center for socio-economic information and forecast presented the research team’s report, emphasizing some risks including a resurgence of Covid-19, inflationary pressure, and farm exports affecting economic growth.

The risk of a resurgence of Covid-19 with new strains still exists and may threaten the recovery process of the economy.

Besides, inflationary pressure is increasing strongly. Some important indicators such as the Producer Price Index (PPI) and raw material price index signal an increasing trend in producer prices for the industrial sector.

Exports, especially farm exports, are affected by factors of international competition, as well as uncertainty from traditional markets, Thang added.

The research team revealed that the increase in the price of assets such as gold and real estate shows that the cash flow has not been channeled to production activities.

In the near future, importing input is expected to be more difficult, as prices and trade costs continue to rise. Therefore, Thang recommended the Government should support local enterprises to ensure the source of imported materials, logistics-related obstacles should be removed and congestion at the border due to pandemic prevention measures of neighboring countries needs to be properly dealt with.

According to the Vietnam Institute for Economic and Policy Research (VEPR), Vietnam needs to pay special attention to the risk of imported inflation. The current low inflation in the country is partly due to low consumer demand.

The research team suggested the Government should assess the issue of cost-push inflation, especially the possibility of inflation in the next quarters in 2022, as well as take measures to help limit its negative impacts on domestic consumers.

In particular, it is necessary to weigh up cutting excise tax to deal with rising global gasoline prices, as well as postpone tax and fee increases to stabilize the prices of other commodities.

“Inflationary pressure in the coming time will mainly come from a supply shortage, the disruption of the supply chain will lead to rising input costs, while demand will increase sharply along with the recovery of the economy,” Thang gave his prediction.

Suggestions about support packages

At the seminar, economic experts also emphasized the socio-economic recovery support program being implemented by the Government with total funding of nearly VND350 trillion (US$15.4 billion), in which, the scale of the fiscal policy package is up to VND291 trillion ($12.8 billion), accounting for 83% of the total program budget.

Vu Sy Cuong, Vice-Dean of Financial Policy Analysis under the Academy of Finance said the public investment package is an important fiscal policy that is highly expected to bring good effects and stimulate economic growth directly and indirectly.

He added, however, that the disbursement of capital from the program has not yet been implemented due to some problems in project approval procedures and resource allocation.

“The Prime Minister is very drastic in solving problems for the implementation of infrastructure projects, such as site clearance,” he underlined. “But being drastic is not enough, a bolder legal framework for the allocation of public funds in localities is necessary and also the Government’s instructions to local authorities simplify processes,” Cuong said.

Cuong proposed a management capacity index for public investment projects, which develops indicators to make local leaders and stakeholders more accountable. Based on the index, contractors failing to guarantee the project execution progress will be disqualified,” he said.

Economist Nguyen Dinh Cung, former Director of the Central Institute for Economic Research (CIEM) added, that in addition to the recovery support packages, the driving force for growth in 2022 also comes from the foreign direct investment sector.

“The Government should continue to make breakthroughs in institutional reforms to further improve the business environment and ensure fair competition, towards a full and free-market economy,” he added.

Echoing Cung, economist Ngo Tri Long said the Government needs to reform institutions and refine policies to support the recovery of the domestic private sector including small and micro-businesses, especially the development of new, innovative business models based on the application of digital platforms.