Painkiller for the Economy

2:39:55 PM | 8/4/2020

Vietnam's economy witnessed the lowest first-quarter growth in 11 years, several sector growth indexes plummeting as a result of the Covid-19 epidemic fallout.

In the regular cabinet meeting for March, the Prime Minister affirmed that the economic ‘spring’ will pop up when the epidemic is addressed.

The first-quarter growth was only 3.82%, lowest in 11 years, but this is an effort as many other countries witnessed negative or zero growth.

The newly released report of the World Bank (WB) on East Asia and the Pacific in the time of Covid-19 recognized that Vietnam's economy remained resilient to external shocks in the first few months of 2020. It did not collapse and achieved the highest growth among the countries in the report.

“Difficulties piled up but we are more persistent and more firm to keep the economy from collapsing, with the growth needed to create jobs and ensure macro balances,” the Prime Minister affirmed.

However, we must admit the fact that the growth index of many sectors dropped sharply to multiple-year lows. In particular, the industrial growth reached just 5.28% in the first quarter, lowest in six years; the agricultural growth was mere 0.08%, lowest in four years; and the service growth was only 3.27%, lowest in decades.

Besides, the decline and suspension of manufacturing at many companies affected the country’s growth. Many companies reported sales equal to only 5% in the same period of 2019.

The registration of new business entities slowed down. Companies tended to temporarily withdraw from the market and wait for new development. Major corporations also witnessed the same decline, suspended production or saw revenue equal just 5% of the value recorded a year ago.

Major economic locomotives underperformed. Ho Chi Minh City grew merely 1% in the first quarter.

Therefore, in order to remove difficulties in business, the government decided to enhance the ‘painkiller dosage’ for the economy with a series of support packages.

The first is monetary easing through rate cuts, credit support, debt postponement and rescheduling. In fact, this measure has been adopted with Directive 11 that facilitates a credit support package of VND250 trillion from credit institutions to consider debt extension and postponement, rate/fee cut and no debt re-categorization to provide new loans for business operations. However, the Prime Minister said that this support package of VND250 trillion is not enough; the country needs more.

The second is fiscal stimulation by reducing and extending taxes and fees and increasing public spending. "This package is not only VND30 trillion but has been raised to VND150 trillion, even more,” he emphasized.

The third is supporting the unemployed, the poor and the vulnerable, ensuring social security, with the spirit of preparing to seize opportunities, turning risks into development opportunities when the epidemic is constrained or stopped.

“If the epidemic persists, protecting human lives and health is the first priority, not business and economy. As I said, we sacrifice economic interests in the short term to protect people’s health and lives. So, in economic aspects, the development must be based on protection of people's health, never accept to have economic growth but make light of people's lives and health,” he noted.

The Prime Minister hailed the Ministry of Industry and Trade and EVN Group for reducing electricity prices by 10% with a total value of VND11 trillion. The total value of telecommunication service support packages is about VND15 trillion.

The Prime Minister said that the national conference on solutions to business difficulties will be held at an appropriate time.

Remarking on tasks in the time to come, he clearly stated the spirit of macro stability and inflation control. Attention is necessarily paid to stabilizing the value of the Vietnamese currency and the foreign exchange market, avoiding any adverse fluctuations, soon having an active executive scenario, ensuring liquidity, fully meeting lawful foreign currency demand, and resolutely reducing pork prices while not increasing prices of essential services.

He suggested plans to reduce prices of some essential services, and reduce administrative costs to ease hardships for people and businesses during the time of the Covid-19 epidemic.

Support packages for affected entities

Regarding worker support and social security package, the Prime Minister stated that the Government strongly agreed on a draft resolution on measures to support people adversely affected by the Covid-19 epidemic.

The Prime Minister assigned the Ministry of Planning and Investment, the Ministry of Labor, Invalids and Social Affairs, the Ministry of Finance, the Ministry of Justice and relevant ministries and branches to carefully review and collect opinions at the meeting, complete the draft and submit it to the Prime Minister for promulgation.

The Prime Minister reiterated the principle of support: Only supporting those who suffer a sharp decline in income, lose jobs or cannot guarantee a minimum standard of living due to the Covid-19 epidemic. The support is not equal for all. This should be done on the principle that government and business share the responsibility in which the government only supports a part that fits its capabilities. Support is given to the right people in a public and transparent manner

Regarding support contents, the Prime Minister proposed including six groups of entities in three months with the levels stated in the draft resolution.

Underlining the role of businesses in supporting social security, the Prime Minister mentioned price reduction of electricity, water, internet and telecommunication services.