All Measures Resorted to Boost Investment, Export and Consumption

10:30:22 AM | 14/7/2020

Vietnam’s gross domestic product (GDP) expanded 0.36% in the second quarter and 1.81% in the first six months of 2020, the lowest rate in 10 years for Vietnam. However, globally, Vietnam is among very few countries to post positive growth.

Many industries report low or negative growth

According to the report on social and economy performance in the first six months of 2020 released by the General Statistics Office (GSO), the agriculture, forestry and fishery sector rose by 1.19% and contributed 11.89% to the overall economic growth; the industry and construction sector grew by 2.98% and contributed 73.14%; and the service sector edged up 0.57% and contributed 14.97%.

The lower growth of agriculture, forestry and fishery in the first six-month period was attributed to climate change, Covid-19 pandemic and African swine fever. In particular, the agriculture sector edged up 0.83% and contributed to only 0.1 percentage points of added value of the economy. Forestry rose by 2.15% but contributed only 0.01 percentage points to the overall growth on the low share. Fishery increased by 2.37%, only higher than the growth of 2.34% and 1.25% in the first six months of 2013 and 2016 in the 2011-2020 period, and contributed 0.08 percentage points.

Industry posted a growth of 2.71% year on year in the January-June period, much lower than the increase in the same period of 2011-2020, and contributed 0.93 percentage points to the added value of the whole economy. The processing and manufacturing sector expanded 4.96%, lowest in 2011-2020, and contributed 1.1 percentage points. The construction sector augmented 4.5%, higher than the growth of 0.11% and 2.41% in the corresponding periods of 2011 and 2012 in the 2011-2020 period and contributed 0.28 percentage points.

In particular, the Covid-19 pandemic has seriously affected trade, services and import-export activities. The service sector performed worst in the 2011-2020 phase. In the service sector, wholesaling and retailing grew by 4.3% over the same period of last year, the largest contributor to the added growth of the economy with 0.46 percentage points. Finance, banking and insurance soared 6.78% and contributed 0.32 percentage points. Transportation and warehousing shrank 3% and took away 0.1 percentage points. Accommodation and catering services slumped 20.7% and erased 0.95 percentage points.

From January to June, more than 62,000 companies were established with a combined registered capital of VND697.1 trillion, which registered to employ 507,200 workers, down 7.3% in corporate entity, 19% in value and 21.8% in workers employed year on year. Also, in this period, 25,200 companies resumed operations, an increase of 16.4% over the same period in 2019.

Burdens on the horizon

Achieving the target growth of 6.8% set for 2020 is a big and difficult challenge. In fact, most industries and fields experienced a decline in growth, including growth drivers such as processing and manufacturing sector, market services and consumption.

At the Government's videoconferencing meeting with localities, the Prime Minister also pointed out shortcomings. Accordingly, despite macroeconomic stability, potential risks include volatile crude oil, expensive pork prices, rising exchange rate and international currencies. Therefore, the Prime Minister requested all levels to closely follow international developments and resolve to achieve macroeconomic stability.

“Macroeconomic stability is a consistent view of the Government, especially in the context of current fluctuations. The driver of the economy consists of three important components: investment, export and consumption. All measures must be deployed to create driving force for national development,” he emphasized.

In order to stimulate growth and promote economic recovery, actions need to be faster and stronger, said Minister of Planning and Investment Nguyen Chi Dung. Central and local agencies need to seriously, drastically and urgently speed up the implementation of solutions set out in resolutions of the Party, the National Assembly, the Government and the Prime Minister; and persist in the course of actions to revive and develop the economy.

At the same time, they necessarily coordinate to implement short-term economic recovery and development policies in a fast, strong and effective manner together with medium and long-term trends; grasp opportunities to create new motivation for development; utilize advantages to effectively catch redirected international investment flows for the country's development; promote innovation, creativity and digital transformation in the country, develop new rules and regulations of global and regional economic governance.

The Minister also underlined the necessity to focus on every growth potential in each industry, field, locality and key project.

For industrial production, it is necessary to actively restore disrupted supply chains and value chains; build and develop new ones; focus on handling industrial inventories; stimulate and strengthen domestic market; strongly implement domestic tourism stimulus programs, urgently operate the Tourism Development Assistance Fund; launch consumer stimulus programs; and expand the domestic market.

On import and export, Vietnam will accelerate trade promotion, apply e-commerce, and develop e-commerce platforms; apply electronic payment transaction technology, logistics and delivery; seek new markets for goods being canceled or delayed delivery on the impact of the Covid-19 pandemic; improve product traceability capacity, and export agricultural products to markets, especially the Chinese market.

By Quynh Chi, Vietnam Business Forum