Economic experts: Vietnam has little room for fiscal and monetary policy

This is the recommendation put forward by various experts during a seminar held on March 31 in Hanoi to discuss the Vietnamese economy in 2020 and prospects for the year ahead, with a specific focus on responding to and overcoming the impact of the novel coronavirus (COVID-19) pandemic.

The COVID-19 pandemic has had a strong impact on the entire economy since its initial outbreak in January, 2020, serving to pose a range of unprecedented challenges and great difficulties to the national economy. Due to this, economic growth last year stood at 2.91%, the lowest level in roughly two decades.

Despite these issues, the Vietnamese economy is still widely regarded as a bright spot in the context of both the global and regional economy suffering negative growth. Indeed, the nation belongs to the group of countries that recorded the highest growth in the world.

According to a group of experts from the National Economics University (NEU), this year's economic growth target of 6.5% in line with the Government's plan is very difficult amid unpredictable developments relating to the COVID-19 pandemic.

As of late February, the pandemic had yet to be fully contained in the country, with many localities continuing to impose social distancing measures, whilst a range of socio-economic activities had yet to return to normal.

Due to these factors, experts recommended the nation persevere with its long-term reforms as it strives to improve the foundation of its macro-economy, in addition to the current short-term policies which attempt to mitigate the damage caused by COVID-19.

Jacques Morisset, lead economist and program leader for Vietnam of the World Bank, said the nation has so far brought the COVID-19 pandemic under control, thereby turning it into opportunities moving forward.

The country has also increased its presence in the global trade as it pushes for faster digital transformation and has better pursued green technologies, among other things.
Despite these positives, Morisset notes that the pandemic has caused new risks of damage for the nation.

Ass. Prof. Dr. To Trung Thanh from the National Economics University (NEU) said that the driving force for economic growth in the year ahead will continue to come from the foreign economic sector.

Most notably, production and exports of the FDI sector typically play an important role in economic growth as domestic production continues to face numerous difficulties, with service industries striving to grasp high-growth opportunities due to the COVID-19 pandemic. However, the growth rate of the foreign economic sector is heavily dependent on external shocks and the uncertain resilience of the world economy, Dr. Thanh said.

Ass. Prof. Dr. Pham The Anh from the NEU also stated that the ratio of Vietnamese money supply to GDP has been very high in recent times, with cash flow failing to go into the production sector, but has instead been greatly focused on the non-manufacturing sector, especially the gold, securities, and real estate market. This has therefore stifled local economic growth. As a means of ensuring economic growth in the long term, it remains important to mobilise resources from citizens and maintain a stable macroeconomic environment.