Is 6 - 6.5% GDP growth target for 2022 achievable?

The target will come off the back of a challenging year for the country, particularly as the SARS-CoV-2 virus remerged in late April, exerting a severely negative impact on the national economy which suffered a 6.14% contraction during the third quarter of the year.

In a report addressed to the freshly-concluded NA session, Prime Minister Pham Minh Chinh admitted difficulties faced by the local economy due to the damage caused by COVID-19, and he then said the government had decided to lower the growth rate for this year to between 3% and 3.5%.

However, even the revised growth target set for this year will be difficult to achieve, according to deputy Le Thanh Van, as it requires the national economy to expand by 8.6% in the fourth quarter of the year given the fact that the COVID-19 outbreak is yet to be completely under control.

Meanwhile, a majority of deputies agreed that the 6% to 6.5% rate projected for 2022 must be obtained as a means of creating momentum for the following years.

“By 2030, we have set out to become a high middle income country with an annual average GDP growth rate likely to reach 6.5% to 7%,” said Huan.

Economist Dr. Tran Dinh Cung forecast that the GDP growth for this year may hover around 2%, far lower than the Government’s expectation. Therefore, the national economy must average annual growth of 7% from 2022 to 2025 in order to achieve the 6% - 6.5% growth target set for the whole period from 2021 to 2025.

“Even if the epidemic is well controlled, 2022 will also be a tough year if you look at the high target to be achieved. But I support the way the government has set the target, because this will bring to bear pressure and at the same time motivate us to realize the target,” Dr. Cung told Dau Tu (Investment) newspaper.

NA deputy Tran Hoang Ngan agreed that the prolonged COVID-19 outbreak has dealt a heavy blow to the domestic economy, although he remains optimistic that there are factors which will help the country to secure high growth over the coming years.

According to Ngan, Vietnam has maintained macroeconomic stability, whilst its major export markets such as the United States and Europe are recovering strongly. In addition, it has signed many bilateral and multilateral free trade agreements, of which 14 have already taken effect.

“If the COVID-19 outbreak is completely controlled, the 6 - 6.5% growth target will be achievable or the rate will be even higher,” said Ngan.

In order to secure the 6% to 6.5% growth rate for 2022, the economy is said to mobilise VND30 trillion worth of social investment capital, including nearly VND20 trillion from citizens.

Finance Minister Ho Duc Phoc stated that his Ministry is drafting an economic stimulus package worth VND20 trillion a year through interest rate support, in order to mobilise roughly VND1 quadrillion over five years for the economy.

“With VND1 quadrillion to be injected into the economy, we can then create jobs, boost the economy, increase budget revenue and reduce budget deficit,” stressed Minister Phoc.

Economic experts also expect the implementation of an economic stimulus package which is big enough for the next two years. Dr. Cung supported this view, outlining that the package will stimulate the economy, not just for social security.

“Many propose that the package should account for about 1 - 2% of GDP, but I expect a larger number for the period 2022 - 2023 and it may be extended to 2024," said Dr. Cung.

The economist also suggested that existing bailout packages should be fully disbursed to the right businesses that have been hit hard by COVID-19 to help them gather full steam. According to the economist, total expenditure on existing bailout packages is rather small compared to the loss of businesses.