Economic expert Cấn Văn Lực

The COVID-19 pandemic has had a comprehensive impact on socio-economic aspects as well as the implementation of the development goals for the last two years, as well as the five-year period of 2021-2025.

In order to help the economy overcome difficulties and catch up with the global economic recovery, the Government issued Resolution 11 on the economic recovery and development programme on January 30, 2022, while the Resolution 43/2022 of the 15th National Assembly on fiscal and monetary policies has been also issued to support this programme.

Economic expert Cấn Văn Lực spoke to Vietnam News Agency about these issues.

At the beginning of the year, the Government issued the economic recovery programme, which is considered the largest ever comprehensive programme. What does this programme mean in realising economic development goals this year and in the 2021-2025 period?

This is an important programme, because without it, the process of socio-economic recovery and development cannot be fast and sustainable, and thus it is difficult to achieve the target of economic growth at 6.5-7 per cent set by the 13th National Party Congress and the National Assembly.

This programme also helps individuals and businesses overcome difficulties during and after the pandemic and recover production. Thereby it creates trust for better production and business performance.

It also creates conditions to improve Việt Nam's medical abilities, especially basic and preventive healthcare, which still have many shortcomings revealed during the pandemic.

The programme also focuses on infrastructure investment. This is an extremely important factor and one of the three strategic breakthroughs set out by the 13th National Party Congress and the National Assembly's resolutions.

Finally, the programme pays attention to social security issues, especially housing for workers and social housing, which is also a weakness that has appeared during the pandemic.

With these five key tasks and commitments on institutional reform and innovation of business conditions, Việt Nam is expected to attract more investment and promote production and business, which are extremely important tasks of this programme.

If Việt Nam does well with the programme, GDP growth may even increase by 1.5-2 percentage points per year in the next two years.

How do you evaluate the targets of some support policies, especially the financial support policies of this programme?

In fact, obviously seen that the programme's goal is to help individuals and businesses, of which the financial policy is central, with the value accounting for 83 per cent of the total programme, focusing on welfare issues, business recovery, infrastructure investment and healthcare.

If Việt Nam implements these four goals well, this economic recovery and development programme will be successful. The programme is meticulously built and received high consensus from the National Assembly, the Government, individuals and businesses. I hope that during the implementation process, there is specific guidance to make the programme a success.

Many experts believe that implementing the economic recovery programme will increase public debt and overspending. What are your opinions on this matter?

The budget deficit has been discussed and approved by the National Assembly. The State budget deficit over the next two years will increase by an average of 1-1.2 per cent of the year’s GDP. I think the State budget deficit of about 5 per cent of the GDP is an acceptable level, much lower than the current global average budget deficit at 10 per cent of GDP. In emerging and developing countries like Việt Nam, the budget deficit also increases significantly to 5-6 per cent.

Public debt may also increase but will be within a safe level. Meanwhile, the Government's debt repayment obligation has increased, sometimes reaching 25 per cent of total budget revenue. I think it is acceptable. This is necessary for Việt Nam to recover and develop its economy after the pandemic.

Together with economic recovery, inflationary pressure is also tending to increase. What solutions are needed  to proactively deal with inflation and bad debts?

This year, inflation worldwide as well as in Việt Nam is mainly due to the supply of goods. The impacts from the war and also the pandemic have caused many supply chains to be disrupted. Especially, Russia's military operation in Ukraine has pushed up the price of energy and raw materials, and transportation costs very quickly, causing Việt Nam to increase the cost of imports. The oil prices this year are expected to increase by 30-40 per cent on average.

With the increase in oil prices, economic growth reduces while inflation increases. If the average oil price this year increases by 30-40 per cent on year, Việt Nam's GDP is estimated to reduce by 1.1-1.3 percentage points and inflation will be pushed up by 0.8-1 percentage points. Under this scenario, Việt Nam's economic growth will be from 5.7-6 per cent, while inflation will rise to about 4 per cent.

Việt Nam needs solutions to control inflation. Of which, it needs better coordinate fiscal, monetary policies and pricing policies as well as other macro policies to ensure inflation does not increase suddenly.

Besides that, the State must have solutions to stabilise petrol prices, which is an important issue for this year's inflation. The ministries and the Government have come up with a number of solutions to control and stabilise petrol and oil prices. But I think it is necessary to do this more strongly, especially to limit the situation of hoarding to raise prices in petrol and oil trading facilities. It is also necessary to limit the illegal import of petrol and oil. In addition, Việt Nam needs to diversify energy supply sources.

Finally, there is the issue of policy coordination. For example, petrol and oil prices are still adjusted every 10 days, but due to the Tết (Lunar New Year) holiday, the adjustment was interrupted. I think it is necessary to review the mechanism on managing petroleum prices in general and the management of petroleum stabilisation fund in particular. At present, the National Assembly and the Government are reviewing these issues. But the most important thing is to ensure the long-term supply of petroleum for national energy security.

Public investment accounts for a large part of the package on supporting for economic recovery worth VNĐ350 trillion (US$15.3 billion). However, this is also an area facing many difficulties in implementing the tasks of the programme on socio-economic recovery and development. What are the solutions for this issue?

In fact, the recovery programme is mainly spent on infrastructure investment worth VNĐ113 trillion and this is also an important breakthrough strategy of Việt Nam. I think it is a feasible programme because this investment is put in specific projects and there is flexibility in coordinating capital from public investment with capital from the economic recovery programme.

However, there are still some projects under this programme whose dossiers have been delayed. The Prime Minister has sent two dispatches over the past two months to urge the implementation of the economic recovery programme in general, and public investment and infrastructure investment in particular.

Another very important thing is that localities, ministries and sectors still need to be proactive in their funding because they cannot rely entirely on this economic recovery programme. The recovery programme provides just additional investment.

Urging, coordinating, checking and monitoring are always important factors to ensure projects are implemented on schedule with quality and efficiency.

Enterprises are one of the beneficiaries of support packages in the economic recovery programme. What are your recommendations to have the most effective policies for businesses?

Enterprises must be very proactive in studying and accessing the programme. The businesses that do not take action will never access the programme.

Meanwhile, ministries and sectors should issue detailed instructions on implementing the programme as soon as possible. I hope businesses and associations provide substantive comments during the process of building the guidance so that after this policy is promulgated, it can be put into practice as quickly as possible.

In addition, it is necessary to strengthen information technology to reduce administrative procedures during implementing this programmeme, ensuring more publicity and transparency, and safety in the context of the pandemic.

Finally, the programme must be implemented quickly and efficiently as expected. VNS