Vietnam’s Economic Growth to Bounce Back Strongly

10:05:10 AM | 3/14/2022

The January-February economic picture was bright, featuring high industrial growth, export growth of over 10%, increased foreign direct investment, and controlled inflation. This is the foundation for Vietnam's economy to recover and regain growth momentum in 2022.

Fundamental factors underpin economic recovery

The socioeconomic performance in February 2022 started to respond to Resolution 11/NQ-CP of the Government dated January 30, 2022 and Resolution 43/2022/QH15 of the National Assembly on socioeconomic recovery and development program and fiscal and monetary policies. According to the Ministry of Planning and Investment, the Vietnamese socioeconomic performance continued to fare well in February 2022 and the first two months of the year. Most industries, fields and localities recovered and regained rapid growth momentum.

The merchandise import and export value rose 13% year on year to US$108.52 billion in the first two months of 2022. The export value was up 10.2% to US$53.79 billion and the import value grew 15.9% to US$54.73 billion. The trade deficit was US$937 million as a result.

Aided by the growth of industries and fields, the Government's regulation policies assured the business community of economic resilience and development in the coming time. It was estimated that 42,600 companies were established or resumed operations in the first two months of 2022, up 46.2% over the same period of 2021. Of the sum, nearly 20,300 new companies were established, up 11.9%, and 22,300 enterprises returned to operation, up 102.5%. This was a positive signal for business development in 2022.

One of the bright spots on the two-month economic picture was the continued rebound of foreign direct investment (FDI) flows, with existing projects whose revised investment fund significantly expanded 123.8% from a year-ago period. This showed that foreign investors continued to believe in Vietnam's investment environment and expand their operations when the socioeconomic recovery and development program was carried out.

Besides, State-funded investment was estimated to reach 8.8% of the full-year plan in the first two months, up 10.4% over the same period of last year.

Consistent solutions

Recently, at a regular cabinet meeting in February 2022, Prime Minister Pham Minh Chinh affirmed that many difficulties and challenges are expected in March 2022 and the following months. He requested ministries, agencies and localities to have high determination, great effort, firm action, effective, flexible and creative administration to create a rapid and sustainable recovery momentum throughout the year to complete all tasks at the highest level.

Accordingly, it is necessary to monitor, follow up and firmly grasp the situation to have workable actions and solutions; effectively control the epidemic; maintain macroeconomic stability, control inflation and ensure large balances. Furthermore, it is necessary to accelerate public investment disbursement, and resolutely adjust capital allocated to ministries and local agencies in March. The investment fund will be positively allocated to right and feasible projects in the three national target programs. Official development assistance (ODA) and foreign loans will be actively disbursed.

Among solutions for economic recovery and development, the Government emphasized the priority of solving difficulties for enterprises, such as tax and fee exemption and reduction, interest support, labor problem solving and employee care, to create favorable conditions for businesses to return to the market. This is the driving force behind economic recovery.

Regarding business support programs, the General Statistics Office (GOS) said that it is necessary to support businesses to access capital to restore production and business, and quickly launch a credit support program that applies a 2% interest rate on commercial loans in the recovery support program under Resolution 11 of the Government. Low-interest loan packages with a maturity term ranging 3-6 months, that support businesses to pay salaries to their employees, should be vigorously deployed. Digital transformation needs to be more actively and quickly accelerated to support businesses in all industries, especially small and medium-sized enterprises, to achieve a practical, effective digital economy and digital society and scale up e-commerce.

Last but not least, it is important to launch a tourism reopening roadmap; closely monitor epidemic developments to take contextually based measures to manage tourism. In addition, there is a need for appropriate solutions to maintain stability in currency and foreign exchange markets; actively, flexibly and consistently use monetary policy tools, closely coordinate with fiscal and other macroeconomic policies in order to control inflation, stabilize macroeconomic performance, ensure major economic balances and foster socioeconomic recovery and development; and strictly control credit for areas that are exposed to high risks.

By Ha Linh, Vietnam Business Forum