Economic expert talks solutions for economic growth amid challenges

July 06, 2022 - 08:01
Economic expert Nguyễn Bích Lâm talks to Việt Nam News Agency about Việt Nam’s economic growth prospects in 2023 and ways to boost growth in the face of challenges created by supply chain breaks and geopolitical instability.

Workers at May 10 Garment and Textile Company. VNA/VNS Photo

Economic expert Nguyễn Bích Lâm talks to Việt Nam News Agency about Việt Nam’s economic growth prospects in 2023 and ways to boost growth in the face of challenges created by supply chain breaks and geopolitical instability.

Can you assess the economic picture in Việt Nam over the first six months of 2022?

In the first six months of 2022, Việt Nam's economy experienced a time when advantages and challenges are intertwined. The consequences of the COVID-19 pandemic remain, while Russia-Ukraine conflicts and US and Western sanctions against Russia have exacerbated the disruption of global supply chains.

Furthermore, the world is facing a crisis in energy, food and finance. Inflation in developed and emerging economies increased across the globe to the highest level in the last four decades.

International financial institutions have forecast that the world economy will grow slowly in 2022, reaching about 2.9-3.1 per cent compared to the growth rate of 5.9 per cent in 2021.

Việt Nam's production, on the other hand, depends quite a lot on the source and price of imported raw materials and fuel.

In the first six months of 2022, Việt Nam's economic growth reached 6.42 per cent and average inflation was controlled at 2.44 per cent. We have ensured macro stability and major balances of the economy. This is a success within the six-month economic picture with many bright spots to be proud of.

The agriculture and fishery sector increased by 2.78 per cent, ensuring the full supply of the economy's food needs with stable prices. That is the foundation of controlling six-month inflation at 2.44 per cent in the context that the world is facing a food crisis and high food prices.

Foreign investment in Việt Nam in the first six months of the year is also a bright spot in the economy.

Foreign direct investment capital in Việt Nam in the first six months of 2022 is estimated at US$10.06 billion, up 8.9 per cent over the same period in 2021. This is the highest amount of realised foreign direct investment capital in the first six months of the past five years.

Việt Nam's economic position in international trade is strengthened and confirmed by the fact that goods export turnover in the second half of the year is always higher than in the first half.

In the first six months of this year, export turnover reached $185 billion, up 17.3 per cent over the same period in 2021; of which, the export turnover of the foreign-invested sector reached $136 billion, up 16.3 per cent, accounting for 73.5 per cent of the total export turnover of the economy.

Along with that, the bright spots in improving the business environment, production, investment and international trade in the past six months reflect the fact that the economy has gradually recovered. It is an important basis, creating high growth momentum for the next six months of 2022 and the following years.

How will a well-designed and effective socio-economic recovery and development programme create motivation and confidence for the business community, and improve the production capacity of the economy?

Right from the beginning of the year, with the motto of creating the best conditions for production and business activities and overcoming bottlenecks and inadequacies in the economy due to the consequences of the fourth wave of the COVID-19 pandemic, the Government has urgently issued many policies and solutions to promote economic development.

In particular, on January 30, 2022, the Prime Minister issued Resolution No. 11/NQ-CP on the Socio-Economic Recovery and Development Programme and implemented Resolution No. 43/2022/QH15 of the National Assembly on fiscal and monetary policies to support the programme.

The support packages are delicately designed to overcome difficulties for businesses, business households and people's lives. At the same time, it has created motivation, improved the production capacity of the economy, created confidence in the business community, and strongly improved business conditions.

The policies, solutions and direction of the Government, along with the efforts and flexibility of the business community, are reflected in the Purchasing Managers' Index (PMI) of the manufacturing sector in January 2022 in Việt Nam, which reached the mark of 53.7 points, up from 52.5 points in December 2021.

Right from the beginning of 2022, output and the number of new orders increased sharply at the fastest rate in nine months before January 2022. The number of new orders from abroad continued to increase and reached the highest growth rate since November 2018.

By May 2022, the PMI in Việt Nam increased and reached 54.7 per cent. This reflects the fact that output and new orders in the economy increased more strongly in the context of production recovering from the pandemic.

Job creation is faster and the "health" of the non-state sector is significantly improved. Business conditions have improved to their best level in more than a year.

Do you think that the Government's decisions issued and implemented at the right time have helped the economy recover quickly?

With breakthrough thinking, urgent and flexible action, putting effective direction first and the effective companionship of the National Assembly and the whole political system, many policies and solutions issued and implemented swiftly by the Government, our economy has recovered quickly.

The Government's promulgation of Resolution 128/NQ-CP, dated October 11, 2021, has a very important meaning in fighting the pandemic and keeping economic development. Resolution 128 and the decision to reopen the economy and welcome back tourists are pivotal in reversing the economic results in 2021.

The total domestic demand of the market with nearly 100 million people has recovered, reflected in the total retail sales of consumer goods and services in the first six months of 2022 with a larger scale and growth rate compared to the same period within the past five years.

Besides the bright spots, Việt Nam's economy still faces many difficulties and challenges. How would you evaluate these difficulties and challenges?

The COVID-19 pandemic has caused many socio-economic difficulties. The consequences of the pandemic have not been handled when we witnessed the Russia-Ukraine conflicts, and US and Western sanctions.

In the first six months of 2022, a total of 83,570 enterprises suspended business for a definite time, shut down, or are waiting for dissolution procedures and completing dissolution procedures.

The total number of enterprises temporarily suspending production and business, waiting for procedures and permanently withdrawing from the market accounted for 71.48 per cent of the total number of newly-established enterprises and enterprises returning to operation (after the pandemic).

This reflects that the business sector is still seriously vulnerable to the difficulties of the world and domestic economy.

Although export turnover reached impressive numbers, the export turnover of the domestic economic sector only reached $49.26 billion, accounting for 26.5 per cent of the total export turnover.

It means Việt Nam's international trade position is created by the FDI sector. The supporting economy and the linkage between the domestic economic sector and the FDI sector are still weak and loose.

Việt Nam's domestic production is highly dependent on imported raw materials from outside, with the ratio of the cost of imported raw materials to the total cost of raw materials of the whole economy being 37 per cent.

The cost of gasoline accounts for about 3.52 per cent of the total production cost of the whole economy, at a time when the world price of petrol is increasing. This will increase the price of imported and domestic raw materials.

In particular, the increase in gasoline prices has caused many difficulties for production and competition in domestic and international markets.

The disruption of the supply chain and the consequences of US and Western sanctions against Russia has caused an energy crisis, and the high prices of many essential products for production have a direct and quite strong impact on our economy.

What do you think we can do to boost economic growth in the last six months of 2022 and the following years?

In my opinion, in the immediate future, the Government will promptly remove difficulties and obstacles related to mechanisms, policies and administrative procedures. At the same time, the Government will review and abolish unreasonable regulations to speed up the disbursement of investment capital and the implementation of key projects.

Along with that, the Government has stepped up the implementation of support packages of the Socio-Economic Recovery and Development Programme, and stimulus packages to support growth recovery to improve the capacity and competitiveness of Việt Nam's economy.

For businesses, it is necessary to cut input costs, create a fair and open business environment, promote aggregate supply, and reduce inflationary pressure. In addition, there must be breakthrough solutions and timely support for industries and fields that are heavily affected by high prices of energy and input materials.

The State Bank of Việt Nam and the Ministry of Finance will continue to coordinate in the harmonisation of fiscal and monetary policies; actively and flexibly regulate the money market, interest rates and exchange rates in the context that central banks of major economies raise interest rates to control inflation.

At the same time, we need to ensure liquidity, support businesses to stabilise production and support import and export activities of the economy.

The Ministry of Industry and Trade should urgently develop strategies for diversifying the supply of raw materials and materials for the economy, gradually eliminating dependence on a few markets, to maintain production when the supply chain breaks and geopolitical instability occurs.

The Ministry of Industry and Trade and the Ministry of Finance need to urgently submit to the Government a plan to cut or temporarily stop applying taxes on gasoline to keep petrol prices from exceeding the high threshold.

The Ministry of Agriculture and Rural Development, the Ministry of Finance, the Ministry of Industry and Trade, and the People's Committees of the provinces with fishing fleets shall submit to the Government a plan to support fishing activities in the face of increased petrol prices. VNS