6 per cent growth in GDP achievable, says Shinhan expert

Bui Thao Ly, head of Research, Shinhan Securities Vietnam

What is your take on the rebound pace and the GDP growth target for this year?

Considering the first half of the year, the GDP growth target of 6.5 per cent for the year is a challenge, and the key motivating forces need to be further accelerated in the second half.

It is therefore important to focus on fiscal policies to increase total aggregate demand by accelerating public investment disbursement, particularly for pivotal infrastructure projects such as the second phase of the North-South motorway, ring roads three and four, and Long Thanh international airport.

Accelerating infrastructure development not only contributes to promoting GDP growth in the short-term, but also helps the economy to develop sustainably in the long term.

According to the General Statistics Office, a 1 per cent hike in public investment sources compared to the previous year could lead to 0.06 per cent increase in GDP, and Vietnam has room to promote public investment as public debt by the end of 2023 was just 37 per cent of the GDP compared to the maximum of 60 per cent set by the National Assembly.

Measures to fuel local demands, such as tax and fee reduction or exemption, and the introduction of credit support packages, are also necessary.

Experts have also shown their support for the continuation of the 2 per cent VAT reduction until the end of this year to aid business development.

The scale of these reductions in the second of the year is estimated to be around $4.08 billion, of which VAT reduction comes to around $1 billion.

In addition, efforts should be made towards implementing the $5 billion social housing lending scheme, since less than 1 per cent of the volume has been reportedly disbursed until now.

With all of this, the country’s GDP could grow by about 6 per cent for the year, with inflation kept under the set target.

Will the real estate market warm up in the second half?

The real estate market is fraught with numerous challenges, as thousands of projects face legal roadblocks related to land price fixing methods, along with planning and project approval procedures.

Therefore, the introduction of the Land Law, Housing Law and Law on Real Estate Business in August is expected to kick-start a revival in the sector, helping to relieve bad debt pressures for banks since real estate accounted for 60 per cent of corporate bonds that were late in paying principal debt and interest in the first quarter of the year, and made up around 40 per cent of corporate bond total value reaching maturity in the second quarter of this year with a similar percentage maturing in 2025.

Could the lending rate be further softened as banks see an increase in deposit rates?

There is not much room to reduce lending rates further, as deposit rates began to be upwardly adjusted in June at many banks, growing by an average 0.5 per cent.

However, by leveraging diverse measures associated with digital transformation, lending procedure simplification, and cost saving, banks could be able to reduce lending rates from 0.5-1 per cent in the rest of 2024 to support businesses and promote credit and economic growth.

In the first half of the year, the State Bank of Vietnam left discount and refinancing rates unchanged at 3 per cent and 4.5 per cent respectively since June 2023, even though the VND lost value due to the US Federal Reserve keeping the interest rates high for longer than expected to cope with inflation.

After taking a series of measures in the open market such as selling forex reserves and controlling the bullion market, the exchange rate situation has resumed stability since mid-April.

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Refinements necessary for stock market Vietnam’s ambitious endeavour to upgrade its stock market is confronting formidable challenges, such as pre-funding complexities and potential market volatility.

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