Stabilizing the macro-economy, creating an environment conducive to Vietnam’s economic recovery and development

Secretary of the Party Central Committee, Deputy Prime Minister
Wednesday, October 5, 2022 14:04

Communist Review - When the national economy is facing countless challenges and business resilience is in decline, besides solutions to ensure macroeconomic stability, it is crucial to effectively use capital and seize every single opportunity to support the country’s path to economic recovery to catch up in the world economy.


Politburo Member, Prime Minister Pham Minh Chinh with delegates attending the online conference between Government and businesses, business associations, and localities to find solutions to remove difficulties and promote production and business during the pandemic time, August 8, 2021 _ Photo: VNA

In 2021, Vietnam has strived to overcome difficulties and achieve significant performance

2021 is the first year of implementing the Resolution of the 13th National Congress amidst a rapidly and complicated changing global situation that was seriously hit by the COVID-19 pandemic with the emergence of new variants. On the national scale, besides the advantages, there are also unprecedented challenges caused by the fourth outbreak of the coronavirus disease. The highly contagious and dangerous Delta variant has seriously affected all aspects of Vietnam's socio-economic life.

During this challenging time, thanks to the prompt leadership of the Party, the effective control by the National Assembly, and the drastic direction of the Government, the Prime Minister, and localities, the consensus of the whole political system, the entire people, the business community as well as the cooperation and support of international friends with the spirit: “People's health and lives are the top priority”, a wide range of “unprecedented” administrative measures have been implemented. Resilient in the face of “big waves and strong winds”, the whole country stood shoulder to shoulder and acted unanimously to gain success as stated by General Secretary Nguyen Phu Trong when Vietnam controlled the COVID-19 epidemic after just over 3 months. On that basis, the Government promptly issued Resolution No. 128/NQ-CP, dated October 11, 2021, on temporary regulations on “Safe adaptation, flexible and effective control of the pandemic”, creating positive and impressive changes in epidemic prevention and control and socio-economic development, achieving significant results.

As a result, the macro-economy remained stable; core inflation in 12 months increased by 0.81%; the annual average consumer price index (CPI) climbed 1.84% compared to the previous year, the lowest since 2016; major balances are maintained; gross domestic product (GDP) from negative growth of 6.02% in the third quarter of 2021 (the sharpest decline since Vietnam calculated and announced quarterly GDP to date) has reversed impressively in the fourth quarter, making an increase of 2.58% of GDP in 2021; total export and import turnover of goods increased by 22.6%, reaching 668.5 billion USD - the highest level ever, putting Vietnam in the top 20 countries in the world in terms of international trade; the stock market developed rapidly, market capitalization increased by 44.7% compared to the end of 2020; trade surplus is estimated at 4 billion USD; Vietnam ranks in the top 10 global logistics markets;  agricultural sector is still the driving force of economic growth ; despite the pandemic, many large and multinational firmss continue to trust and invest in Vietnam; total foreign investment capital registered in Vietnam as of December 20, 2021, including newly registered capital, adjusted registered capital and value of capital contribution and share purchase by foreign investors reached 31 .15 billion USD, up 9.2% compared to 2020; 985 projects licensed from previous years registered to increase US$ 9.01 billion of investment capital, up 40.5% over the previous year; Vietnam has successfully implemented its "last-in-first-out" vaccination strategy with the largest vaccination campaign ever. The fairly comprehensive socio-economic performances achieved in 2021 have created a solid foundation for the successful implementation of the tasks and goals set out in 2022 and the following years.

In 2022, more challenges than opportunities

The year 2022 is an important pivotal year for the implementation of the goals and tasks of the 5-year socio-economic development plan 2021 - 2025. According to the Resolution passed by the National Assembly, the Government has set a 2022 growth target of 6% - 6.5%. This presents a great challenge to deal with.

In 2022, it is forecasted that Vietnam will face internal and external risks and challenges, but basically, the challenges will outweigh the opportunities.

Around the world, the COVID-19 pandemic remains complicated with emerging variants; the global economic recovery is still fragile; financial and currency markets see complicated changes; interest rate is predicted to accelerate in developing countries when economies recover and reopen; political conflicts between Russia and Ukraine may persist, driving up prices of commodities and affecting seriously the control of inflation of countries due to the disruption of the international supply chain; Strategic competition between major countries is increasingly fierce,...

Domestically, Vietnam continues to face the coronavirus disease meanwhile the resilience and resources of the Government, businesses and individuals decrease; the impact of natural disasters and climate change are also more and more severe;...

Inflationary pressures in 2022 continue to increase due to the high prices of raw materials such as gasoline, coal, and transportation charges; the implementation of the Recovery Program and the bank restructuring increase the money supply leading to inflation risk if there is no flexible and timely solution... This puts pressure on macroeconomic stability.

Solutions to stabilize the macro-economy and create an environment conducive to economic recovery and growth

Faced with the above-mentioned challenges, the Government is well prepared to effectively respond to changes, and combat stubbornly challenges to develop the national economy.

The Prime Minister has directed relevant ministries, agencies, and localities to take solutions to succeed in the economic stimulus Program to get the economy back on the sustainable growth trajectory to catch up with the world economy. Due consideration has been given to 5 groups of solutions as follows:

Firstly, open up the economy and increase investment to improve the capacity of healthcare workers, and strengthen disease prevention and control capacity.

Secondly, ensure social security and provide a bridge to jobs.

Thirdly, support the recovery of enterprises, cooperatives, and business households.

Fourthly, invest in infrastructure.

Fifthly, conduct institutional and administrative reform and improve the business environment. Besides, Resolution No. 11/NQ-CP also clearly stipulated resources for the implementation of the Program, as well as assigns specific tasks to ministries, and central and local agencies according to their functions and competence.

Accordingly, regarding tax and fees exemption and reduction, the Government agreed to reduce the value-added tax rate (VAT) by 2% in 2022, applicable to groups of goods and services currently subject to a 10% VAT (reduced to 8%) for business that calculate VAT by the deduction method and reduce by 20% for business households that calculate the taxable percentage on income (However, the reduction will not include some groups of goods and services such as: Telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production, and production of prefabricated metal products, mining industry minerals (excluding coal mining), production of coke, refined petroleum, chemical products, goods and services subject to excise tax); reduce 50% environment tax on jet fuel, 30% land and water surface leasing fees, 50% registration fees for domestically-assembled vehicles under the Decree No. 103/2021/ND-CP; It is recommended to review and reduce fees and charges to support vulnerable individuals hit by the COVID-19 epidemic; extend the deadline for payment of corporate income tax, personal income tax, value added tax, excise tax and land rent in 2022.

The government has offered an interest rate of 2%/year in 2022 and 2023 through the system of commercial banks for commercial loans to businesses, cooperatives, and business households that can repay and recover their businesses in sectors such as aviation, transportation, warehousing; tourism, accommodation, catering, education and training services; agriculture, forestry, and fishery; processing and manufacturing industry (including machinery, equipment, drugs, pharmaceutical chemicals, and medicinal herbs); software publishing; computer programming and related operations; information service activities; loans to renovate old buildings, build social houses, houses for workers to buy, rent and hire-purchase.

It is essential to stabilize the maximum ratio of short-term capital for medium- and long-term loans, reasonably calculate the required reserve ratio, conduct open market operations, refinance, and direct credit institutions to continue to reduce operating costs to cut lending interest rates by 0.5% - 1% in 2022 and 2023, especially for priority sectors.

Continue to restructure the repayment term, exempt and reduce loan interest and keep debt classifications for COVID-19-affected borrowers unchanged, closely monitor economic and financial market developments to adopt appropriate solutions to help businesses and individuals, and ensure the safety of credit institutions; continue to study and consider reducing electricity and water bills for businesses and individuals; continue to implement preferential credit policies to give a helping hand to vulnerable people...

Synchronously and flexibly implement monetary policy, and closely coordinate fiscal and other macroeconomic policies for socio-economic recovery and growth. However, we are always vigilant over inflation risks and strive to maintain macroeconomic stability and the safety of the banking system.

Closely monitor macroeconomic indicators, especially inflation and bad debt indicators to ensure macroeconomic stability and major balances; strive to increase revenue, cut expenditure, and reduce overspending to achieve the targets set in the national financial plan and public debt borrowing and payment for the 2021-2025 period; in case of big changes or risks, promptly report them to competent authorities for decision. Balance monetary solutions to support the Program with the overall plan to restructure specially controlled banks.

Focus on important and urgent projects that create big spillover effects, are disbursed quickly and drive economic progress under the planning, make efficient use of capital, establish the right balance in the capital structure to complete projects from 2022 to 2025; prioritize support for site clearance of some new projects important to socio-economic development.

Strive to early complete the entire North-South expressway to the East, routes connecting the Northern mountainous region, the Central Highlands with the Central region, the expressways in the Southeast region, and the Mekong Delta; improve transport infrastructure connecting regions, seaports, border gates, industrial zones and clusters; digital infrastructure, digital transformation; health and social infrastructure; labor - employment; prevent and combat riverbank and coastal erosion, ensure the safety of water reservoirs, adapt to climate change, overcome consequences of natural disasters;...

In general, the solutions to implement the goals and tasks of 2022 and the Socio-economic recovery and development program have been clearly stated by the Government in Resolution No. 01/NQ-CP on the main tasks and solutions to achieve socio-economic goals and the state budget estimate in 2022 and the Resolution No. 11/NQ-CP on the Socio-economic Development and Recovery Program and the implementation of Resolution No. 43/2022 /NQ-QH15 of the National Assembly.

The Government will continue to promote the strength of the great national unity bloc, uphold the spirit of self-reliance to relying mainly on internal resources and also on the external force so as to rise up the national economy to challenges and catch up with the world economy, thus creating a foundation and favorable conditions for socio-economic development for the whole period of 2021 - 2025 and the following years, improving productivity, competitiveness, intrinsic capacity and autonomy in the medium and long run.

The Government continues to act shoulder to shoulder with businesses and individuals. It considers difficulties facing people and businesses as issues that the Government, ministries, and localities must handle. It views the success of people and businesses as its success. Each tax amount paid by citizens must be used effectively so that each citizen and business can enjoy their own fruits. The Government and all localities will keep in regular contact with businesses and citizens to understand their thoughts and aspirations; accelerate administrative reform, improve the investment and business environment, create the most favorable conditions for domestic enterprises to recover and develop as well as attract foreign investment.

Under the leadership of the Central Government and resolutions of the National Assembly and Government, ministries and localities should urgently develop and implement efficient programs in a timely public, transparent and lawful manner. Reality shows that the implementation of decisions in recent years is not up to par. Therefore, in the coming time, ministries and localities must be active and act promptly, effectively manage risks, develop incident response plans; accomplish their functions and tasks; coordinate smoothly with relevant agencies to early detect difficulties and obstacles to proactively handle according to their competence or propose reasonable solutions to competent authorities under regulations.

While carrying out their mission, ministries and localities must promote a strong sense of social solidarity, democratic centralism, collective leadership, and personal responsibility. The bigger challenge is, the more it is necessary to unite, promote democracy, thoroughly analyze the situation, discuss, and listen to the voices of experts, businesses, and individuals to make good policies and ensure an efficient, accountable, transparent, and lawful implementation under the motto: national interests come first.

It is also crucial to emphasize that the Government will accelerate decentralization to create a conducive climate for ministries, branches, localities, and businesses to well perform their assigned tasks, boost the trust of the Party and the people. Decentralization needs to be combined with inspection and supervision. Reality shows that the more decentralization is accelerated, the more supervision is reinforced to prevent the abuse of public affairs to seek illicit private interests. The Government drastically fights against "group interest", corruption, and negative phenomena, and strictly punishes law violations, ...

Consequently, in Resolution No. 11/NQ-CP, the Government demands that the Standing Committee of the National Assembly, the Ethnic Council and Committees of the National Assembly, the National Assembly Delegations, the National Assembly deputies, and the People's Councils of provinces and centrally run municipalities shall, within the ambit of their tasks and competence, supervise the implementation of the Resolution; The Central Committee of the Vietnam Fatherland Front, the Vietnam Trade and Industry Confederation, the Vietnam General Confederation of Labor, socio-political organizations, socio-professional organizations shall strengthen supervision and assess the performance of the Program; The State Audit of Vietnam shall organize an annual audit, ensure a rapid, efficient, transparent implementation, fight against negative phenomena, corruption, group interests, and submit periodic reports to the National Assembly at the end of 2022, 2023 and in the middle of 2024;...

The Government wishes to gain the support of individuals and businesses so as to succeed in the program of socio-economic recovery. First and foremost, it is urgent to accomplish the “Spring vaccination campaign” to tackle the COVID-19 pandemic; Speed ​​up research and production of drugs to treat COVID-19; Purchase vaccines and vaccinate children aged 5 to 12 for Covid-19,... to increase population immunity and create a foundation for socio-economic growth of Vietnam.

Recently, in the mass media, domestic and foreign scientists and economic experts have all expressed their strong belief in the socio-economic recovery of Vietnam shortly. However, that faith and hope can only be realized when everyone joins hands and gets involved. Every decision made by the Central Committee, National Assembly, and Government should be effectively implemented to bring policies to life.

This article was published in the Communist Review No. 988 (Avril 2022)