Nguyễn Bích Lâm

Việt Nam's economy is gradually recovering so gross domestic product growth is forecasted to reach 2-3 per cent in the fourth quarter of 2021 and 1.6-2.1 per cent for the whole year.

Economic expert Nguyễn Bích Lâm, former director of the General Statistics Office speaks to the Vietnam News Agency about this issue.

How was economic development in November during the process of recovery after the COVID-19 outbreak?

In the first 11 months of 2021, enterprises, business households and other economic organisations made efforts to overcome difficulties, creating brighter economic results.

Việt Nam had 105,600 newly registered enterprises in 11 months, or 83.3 per cent of the number of newly-established enterprises in the first 11 months of 2020. Besides that, 40,500 enterprises restored operation.

Foreign investment in Việt Nam is a highlight of the economy. Although, the economy suffered a strong impact from the pandemic in the third quarter, foreign direct investment (FDI) reached $26.46 billion in the first 11 months of 2021. Of which, the processing and manufacturing industry attracted a $12.78 billion FDI capital, accounting for 57.9 per cent of the total. This sector received the largest FDI and was the main driver of exports.

In the context of the pandemic disrupting the supply chain, many exporting enterprises have faced challenges, including difficulties in input materials and consumption markets and high transportation and logistics fees. However, the national export value in 11 months reached $299.67 billion, up 17.5 per cent over the same period in 2020.

The import value of goods was estimated at $299.45 billion, up 27.5 per cent year on year over the same period last year. Of which, the import of raw material was estimated at $280.2 billion (up 27.9 per cent), accounting for 93.6 per cent of total imports. This goods group was used in production, creating momentum for economic growth.

The results in foreign direct investment and trade sectors showed that foreign investors have confidence in Việt Nam so many investors have committed to increasing investment in the future.

Việt Nam's economy still has many difficulties, especially the business sector that faces high input material prices and slow disbursement of public investment. What do you think about these difficulties?

The COVID-19 pandemic has caused difficulties not only in the economy but also in social issues. In the 11 months of this year, there were 106,500 enterprises temporarily suspending business, while 54,400 enterprises withdrew from the economy.

The business sector, with an important role in economic growth and job creation, has been seriously hurt by the difficulties of the world and domestic economies.

The prolonged social distancing due to the pandemic has disrupted the supply chain of goods and labour. Underemployment led to spending cuts and a sharp drop in aggregate demand in the economy. Total retail sales of consumer goods and services in 11 months decreased by 10.4 per cent, significantly affecting the economic growth target.

Public investment has played an important role in economic growth and job creation. However, disbursement of public investment was down 8.7 per cent over the same period in 2020, reaching 73.8 per cent of the year plan.

The agriculture sector that has always been one of the pillars of the domestic economy has faced many challenges this year. Prices of agricultural materials and feeds for livestock and aquaculture have increased. Besides that, the diseases of pigs and poultry are complicated.

Market demand does not recover and selling prices of agricultural and aquatic products are low, making farmers suffer losses.

How is economic growth this year after carrying out the Government’s solutions to remove those difficulties?

The fourth outbreak of the COVID-19 pandemic has caused severe consequences for the economy, especially the economic centres of the country such as Hà Nội, HCM City, Đồng Nai and Bình Dương. The total gross domestic product (GDP) of these cities and provinces accounted for 39 per cent of the national GDP.

Therefore, the slow recovery of production in those localities will greatly affect the GDP growth of the whole economy.

With the pandemic being put under control, production in those localities is gradually recovering in the fourth quarter of 2021.

With the initiative of the business community and the support from the Government and localities, the domestic economy is gradually restoring in the fourth quarter.

The optimistic economic forecast is the GDP growth of 2-3 per cent in the fourth quarter and 1.6-2.1 per cent for this whole year.

Many businesses are facing difficulties in production and consumption of commodities, leading to high goods prices. How has this put pressure on inflation in 2022?

Due to a sharp drop in aggregate demand in the economy, the consumer price index this year is estimated to be lower than the target of 4 per cent.

However, there is the inflationary pressure of 2022 on the domestic economy. The world prices of raw materials, goods and services increase while crude oil prices will also continue to rise in the coming years due to strong demand and limited supply. The global crude oil market has experienced the longest supply shortfall in decades.

The lack of investment in oil exploration in the context of oil demand increasing is forecast to keep oil prices at a high level for at least the next year.

Việt Nam's economy depends on imported raw materials, accounting for 37 per cent of the national total cost of raw materials for the economy. The cost of petrol has accounted for about 3.52 per cent of the total production cost of the whole economy. The higher petrol price will push the price of imported and domestic raw materials up.

In addition, investment and business stimulus packages would also create great pressure on inflation in 2022.

What are solutions to overcome existing difficulties and promote economic growth in 2022?

The Government, ministries, sectors and localities urgently complete vaccination for the entire population of vaccination age. They also prioritise vaccination for the labour force of the enterprises and business households so they can restore their production and business.

Besides that, harmonious combination among fiscal policies, focusing on supporting the enterprises and business households to overcome the difficulties.

However, the State should focus on credit support and lowering interest rates for businesses because that will lead to increasing inflation and risks to the banking system.

In addition, it needs to improve disbursement capacity and efficient use of investment capital, especially key industries, large national projects, and inter-regional projects.

The State also needs to improve the efficiency of using public investment capital and exploit the strengths of the signed trade agreements. Those will boost exports and attract more FDI as well as use efficiently this capital.

Việt Nam needs to restructure the economy and each industry, participate in the global value chain, and develop highly-competitive and added value products.

It is necessary to have policies on producing and importing raw materials for production and strengthen inspection and handling of speculation and price manipulation.

It must create favourable conditions to promote production and business and ensure supply and circulation of goods, reducing the inflationary pressure.

Especially, the Ministry of Labour, Invalids and Social Affairs also should grasp the needs of enterprises in using labour and implement solutions on ensuring labor supply. VNS