Unlocking internal driver for Vietnam's economic growth

WVR - In the general context of Vietnam's economy, it is necessary to reconsider the growth drivers from within, especially the drivers to guarantee the economic autonomy.
Recently, Vietnam's economy has faced many difficulties and challenges. (Photo: Viet An)
In the general context of Vietnam's economy, it is necessary to reconsider the growth drivers from within. (Photo: Viet An)

Prime Minister Pham Minh Chinh said that this year, Vietnam strives to have at least 10 among 15 economic growth targets met and exceeded, and at the same time, GDP growth forecast is to reach over 5%.

Vietnam has been through three-quarters of the socio-economic development plan for the 2021-2025 period. Recently, Vietnam economy has faced with many difficulties and challenges. For instance, global economic situation has negative outlook, with global growth is slowing down due to tightening monetary policy, stagnation of Eurozone economies and the 0.25% increase in interest rates of the US Federal Reserve System (Fed), and Russia’s special military operation in Ukraine.

In addition, the electricity shortage from late May to mid-June 2023 due to the heat wave has caused additional difficulties for businesses. The World Bank (WB) estimates that Vietnam's economy suffered a loss of about 0.3% of Gross Domestic Product (GDP) (equivalent to about 1.4 billion USD) due to lack of electricity and limited investment in infrastructure, transmission infrastructure and power grid.

In addition, enterprises also face the situation of capital exhaustion or delayed VAT refund, etc.

Government together with businesses overcome difficulties

Faced with such difficulties, Assoc Prof. Dr. Tran Dinh Thien stated that the Government's companionship has promptly removed difficulties and obstacles for businesses and production and business households.

Assoc Prof. Dr. Tran Dinh Thien acknowledged: “The Government has adhered to the motto of solidarity, discipline, bravery, flexibility, innovation, creativity, timeliness and efficiency. From the beginning of the year until now, many policies and solutions have been urgently issued and implemented by the Government and localities, overcoming bottlenecks and inadequacies of the economy, creating positive effects and belief for the business community, production and business households”.

Dr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR) of the University of Economics, Hanoi National University, said that the mounting external difficulties are putting great pressure on the completion of the socio-economic development goals set for 2023.

"Faced with these difficulties, we can clearly see the determination from the highest level to take drastic action to unlock the driving forces to promote growth," Dr. Viet emphasized.

According to the Deputy Director of VEPR, in terms of macroeconomics, the Government's policy of reducing and extending taxes and fees and its resolutions and directions to remove difficulties have been effective in reducing the number of businesses withdrawing from the market, stimulating domestic consumer demand, thereby contributing to gradually restoring the growth recovery momentum of the last two quarters.

Interest rates decreased continuously in the first months of the year and the increase in credit limits from some banks are expected to contribute to solving difficulties in the production and business sectors.

The Government has been making efforts to accelerate public investment disbursement, thus this target was set higher than previous years, becoming a bright spot in 2023.

Driving force from business sector

At the15th National Assembly’s 6th session of the, reporting on the socio-economic situation in 2023 and expected development plan for 2024, Prime Minister Pham Minh Chinh said that this year, we strive to have at least 10/ 15 targets met and exceeded the target, and at the same time, GDP growth is forecast to reach over 5%.

On this result, Mr. Tran Hoang Ngan, deputy from Ho Chi Minh City delegation said that, in the context of the economy facing both external and internal disadvantages, a growth rate of 5% is very respectable.

The driving force for economic growth must still come from the business sector and social investment. (Source: VASEP)
The driving force for economic growth must still come from the business sector and social investment. (Source: VASEP)

According to Mr. Ngan, the Resolution of the 13th Party Congress sets goals to strive for and implement 3 strategic breakthroughs, 6 key tasks, and 12 groups of solutions. Among them, three strategic breakthroughs are to perfect institutional synchronization; develop human resources, especially high-quality human resources; and build an infrastructure system that still has existing value.

Regarding institutions, the National Assembly and the Government have been making great efforts and progress when developing and reviewing an average of 8-9 bills and many resolutions at each sessions. There are specific mechanisms and policies to meet practical requirements.

On infrastructure, in 2023, development investment capital increases by 40% compared to 2022, determined to deploy 2.87 quadrillion VND in the medium term.

According to Mr. Tran Hoang Ngan, we need to “ask for more” capitals due to the current situation, public investment is the most important driving force to promote growth, resolve bottlenecks, and serve as a launching pad to accelerate for the 2026-2030 period.

To create jobs, ensure social security, improve the investment environment, enhance national competitiveness, reduce logistics... it is necessary to increase investment resources for infrastructure.

Besides economic and transportation infrastructure, digital infrastructure needs attention to serve digital transformation, digital economy, and digital society. In particular it is necessary to invest centrally, especially in leading cities such as Hanoi and Ho Chi Minh City.

Dr. Nguyen Quoc Viet also recommended that, in the general context of Vietnam's economy, it is necessary to reconsider the growth drivers from within, especially the drivers to guarantee the economic autonomy.

He stated: “The driving force for economic growth must still come from the business sector and social investment (including both domestic and foreign private investment). Therefore, we must resolutely open up production capacity, create favorable conditions for the business environment, gaining back trust from production to consumption at home and abroad.

Besides policies to support and restore the economy in general, to promote the internal strength of the domestic business system, it is necessary to continue to have breakthrough institutional reforms to further improve the business environment and competitiveness.

At the same time, it is necessary to reform institutions and improve policies to support growth recovery of the domestic private sector, especially small and micro enterprises”.

On public investment, Deputy Director of VEPR noted that, to fundamentally solve the slow disbursement of public investment, there needs to be breakthroughs in approaching the problem, in working methods and in risk management plans. In developing a project plan, it is necessary to analyze and assess risks as well as assess the overall impact to avoid having to solve situational problems such as raw material shortages, price fluctuations, etc.

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(Translated by Gia Nguyen)