Stable economic environment a must to fuel national growth in H2

An uphill task ahead

The latest statistics unveiled by the General Statistics Office (GSO) show the Vietnamese economy expanded just 3.72% during the first half of the year, the lowest recorded in the same period from 2011 to 2022, with the exception of the 1.74% rate obtained in the January to June period of 2020.

“I think this is not a low growth rate given economic difficulties both domestically and globally,” said Prof. Nguyen Mai, former Deputy Minister of Planning and Investment in a recent interview granted to Lao Dong (Labour) newspaper.

“But apparently more efforts must be made in the second half to meet the estimated 6.5% target set for the whole year. It’s difficult in the current situation,” stated the expert, who is currently head of the Vietnam Association of Foreign Invested Enterprises (VAFIE)

Along with external factors, he noted that the crux of the matter ultimately “lies in the internal affairs of the economy.”

As part of his analysis, the professor pointed out that the third quarter of 2022 recorded robust growth compared to the previous two quarters, although the fourth quarter of last year witnessed growth endure a sharp fall, leading a rather low rate for the year as a whole.

“The main reason is that the corporate bond market which is an important capital mobilization channel for enterprises has boldly been tightened,” he confided.

The gloomy situation lasted until the first quarter of this year, resulting in a high ratio of non-performing loans in commercial banks. Indeed, businesses found it difficult to gain access to bank loans in order to cover expenditures, with some having to halt production or file for bankruptcy.

The export of several farm products such as rice and fruit can be viewed as a bright spot of the economy in the first six months of the year, although the export of industrial products slowed.

“We need more radical, realistic solutions to be introduced to stimulate consumption and support businesses, especially small and medium sized enterprises, through preferential credit packages from commercial banks,” suggested Prof. Mai.

“If local administrations work closely alongside business associations and commercial banks to jointly support businesses, we may achieve growth of about 5-5.5% in the second half of 2023,” he predicted.

Internal strength a priority

Assoc. Prof. Dr. Bui Van Van of the Academy of Finance assessed that the six-month growth rate reflects the true nature of the economy because many businesses are currently in a state of exhaustion.

With the COVID-19 pandemic being successfully brought under control, the Government has introduced policies to support firms and business households, including reducing taxes and lowering interest rates, thereby creating favourable conditions for businesses to cut costs and increase accumulation.

“In Vietnam, the foreign direct investment (FDI) sector makes a significant contribution to national economic growth because of its high capital efficiency, while the domestic economic sector makes a modest contribution. Given this context, the government should continue to embark on its policy to support the development of the private economy, and on the other hand, promote the reform of the state-owned enterprise sector,” suggested the analyst.

Assoc. Prof. Dr. Van also said that a stable economic environment is a must in order to encourage domestic enterprises to go ahead with their investment plans, while people feel secure to invest in bonds and shares.

“So far the economy has only grown in quantity, not in quality. Foreign investment costs us a lot due to incentives on offer. Of course, FDI needs to be respected, but in the long run, domestic enterprises are still needed,” analysed Assoc. Prof. Dr. Van.