Strengthening Macroeconomic Foundation for Stronger Economic Resilience and Recovery

9:10:24 AM | 9/23/2022

Vietnam's socioeconomic performance has been faced with numerous difficulties. Maintaining and reinforcing macroeconomic foundations and broader economic resilience self-reliance and socioeconomic recovery is still challenging.

This is a statement delivered by National Assembly Chairman Vuong Dinh Hue at the Vietnam Socio-Economic Forum 2022 themed "Reinforcing the Macroeconomic Foundation, Promoting Sustainable Recovery and Development". The forum was co-organized in Hanoi by the Economic Committee of the National Assembly, the Central Economic Commission, the Ho Chi Minh National Academy of Politics and the Vietnam Academy of Social Sciences.

Exposed to risks and challenges

Chairman Vuong Dinh Hue emphasized that, over the past time, given the right and timely decisions of the Party and the National Assembly, drastic direction and administration of the Government of all levels and branches, from central to local levels, Vietnam's socioeconomic performance stayed stable and achieved very positive and important results.

After the deepest decline in the third quarter of 2021 (down 6.02%) since Vietnam announced the gross domestic product (GDP), growth recovered gradually from the fourth quarter of 2021 and strongly from the beginning of 2022 to date, he said. In the first eight months of 2022, Vietnam's socioeconomic performance extended robust recovery, featured with many optimistic developments: Well-controlled COVID-19 pandemic; industrial manufacturing outperformance; strongly rebounded retail; high import-export growth; trade surplus of nearly US$4 billion; positive FDI disbursement; rising budget revenue as a result of economic recovery; low inflation, stable interest rates and exchange rates amid heightened pressures; and recovered production and business of enterprises and people. International organizations such as WB, IMF and ADB raised Vietnam's GDP growth prospects in 2022 at 6.7-7.5% and inflation below 4%.

"In August 2022, credit rating agency Moody's forecast Vietnam's economic growth to reach 8.5% in 2022, the highest in the Asia-Pacific region. On September 6, 2022, it upgraded Vietnam's long-term national credit rating from Ba3 to Ba2, a stable outlook. Vietnam is the only country in Asia-Pacific and one of four countries in the world to get upgraded by Moody's since the beginning of the year," Hue added.

Vietnam's economy is still exposed to many risks and challenges such as lingering economic decline and financial instability in the world; potential resurgence and complicated development of the COVID-19 pandemic; monkeypox risks; and increased uncertainty in global trade and financial markets that may undermine resilience, especially industries that lack input materials and components due to supply chain disruptions, he noted.

In addition, central banks of other countries have tightened monetary policies and sharply hiked policy rates to control inflation, subsequently placing the world economy at risk of sliding into stagnation in some countries, especially Vietnam's major trading partners. Energy and food crisis risks are still high. The country's debt risks, including public debt repayment obligations and corporate debt, heightened when interest rates and exchange rates went up.

Notably, according to NA Chairman Vuong Dinh Hue, some components of the Socioeconomic Recovery and Development Program are being implemented more slowly than expected, failing to catch up with the goals and requirements of Resolution 43 of the National Assembly and Decision 11 of the Government, especially the disbursement of housing rental support package for workers; interest rate support package launched through commercial banks; infrastructure investment package (VND113 trillion) which was expected to boost economic recovery but just lately submitted to the National Assembly Standing Committee for approval in late August 2022 mainly due to delays and difficulties in investment preparation. Public investment disbursement remained slow and obstructive, arriving at just 39.2% by the end of August, lower than that in the same period of 2021. ODA fund disbursement only completed just 15% of the plan.

Particularly, slowing but still-high inflation risked rebounding when economic activities returned to normalcy. High energy prices, transportation costs, and rising commodities such as fertilizers and animal feeds also drove up prices of a wide range of goods and services, thus weighing up inflationary pressures.

In addition, settling potential bad debts, handling weak credit institutions and banks and restructuring the financial and banking system remained challenging and difficult. Monetary and financial markets (e.g. stock, government bond and corporate bond) and property markets faced risks, unhealthy and sustainable development. 

“Reinforcing the macroeconomic foundation and strengthening the economic resilience is always a top goal, especially because our country's economy is very open and the world and regional developments are fragile and unpredictable. Practical lessons learned from more than 35 years of doi moi (renovation) showed that, even in the most difficult and challenging times like in the past two years, it can be said that ensuring macroeconomic stability is a "constant" factor to respond to very changeable factors of international economic situations", National Assembly Chairman Vuong Dinh Hue affirmed.

"Key" to success

According to Mr. Nguyen Xuan Thang, Politburo member, Chairman of the Central Theoretical Council of the Communist Party of Vietnam, Director of the Ho Chi Minh National Academy of Politics, macroeconomic stability, active and flexible response to rapid changes is key for Vietnam's economy to go against the wind to success and maintain its growth momentum amid global and regional fluctuations.

To achieve this goal, Vietnam needs to continue institutional reform, with a focus on three breakthrough actions: Perfecting the institutional and legal framework on land management, especially regulations on land valuation, auction and real estate market development to effectively tap important economic resources; completing the public-private partnership mechanism to foster private roles, strengthening decentralization of investment power, removing obstacles. on procedures and regulations for localities to soon deploy and complete key projects such as airports, seaports, and other infrastructure works.

On the other hand, according to Mr. Thang, it is necessary to accelerate public investment disbursement, improve the effectiveness and efficiency of programs and policies to support businesses and people to expand manufacturing and business activities and ensure social security in the wake of the pandemic.

At the same time, there is a need for expanding the development space within the economy, strengthening regional connectivity to create synergy and open up a new space and new drivers for national, regional and local economic development. In particular, priority should be given to removing bottlenecks in the development of Hanoi and Ho Chi Minh City, two economic locomotives of the country, associated with surrounding areas like Hanoi - Northern key economic region - Red River Delta region and Ho Chi Minh City - Southern and Southeast key economic regions. More traffic routes will be opened to enable disruptive development, including economic corridors along artery traffic routes, highways and border gate economic zones.

Lan Anh (Vietnam Business Forum)