Decoding factors affecting Vietnam's economic recovery

VWAS 2023 was held at Pullman Hanoi on August 8, under the theme Swimming in the Vortex. It was the first event for the asset management sector organised by VIR and the Vietnam Wealth Advisor community under the auspices of the Ministry of Planning and Investment.

Nguyen Ba Hung, principal country economist at Vietnam Resident Mission, Asian Development Bank

Vietnam's main export markets, such as the US and Europe, are slowing down, making it very difficult to rebound in the near future. The US economy has been relatively strong, as there haven't been any recessions. However, it still tends to increase interest rates, or at least, not decrease them. Meanwhile, the European economy must maintain high interest rates to control its inflation.

The figures for the European economy show that it has entered a recession. In Asia, China's economy did not recover as expected after it opened its borders. In recent times, the Chinese economy has been the growth engine of the regional economy, with many countries, including Vietnam, relying on its recovery.

The global competition between the US and China focuses on the semiconductor industry. After the US made a move to govern high-tech chips, China responded with restrictions on key material supplies.

Vietnam is currently participating in the electronics industry value chain, so this trend has a relatively significant impact here.

Dominic Scriven OBE, chairman of Dragon Capital Group

The World Bank forecasts that the outlook for 2024 is better than that for 2023. Meanwhile, the International Monetary Fund (IMF) has stated that the growth over the next two years will remain constant, and Fitch Ratings predicts that next year will be worse than 2022.

Last year, we did not accurately forecast the developments after the Russia-Ukraine war or fluctuations in exchange rate inflation. It was a rather sad year to participate in the stock market, and the corporate bond market witnessed many challenging developments.

This year, major banks have adopted an open policy of promoting capital, and the financial markets are progressing well. The central banks of China and Vietnam have tightened their monetary policies, and as a result, Vietnam's inflation has been kept under control for the past two years.

The Ministry of Finance is creating stronger conditions with its financial policy, which is why Vietnam's economy has partially recovered post-pandemic.

Le Xuan Nghia, an expert in finance and banking

Global inflation is on a downward trend, and so is the global dollar index. The IMF believes that global economic growth will remain flat next year, while Fitch Ratings says it is trending down.

Despite the challenging environment, Vietnam has still set a higher target for economic growth next year. With this goal, it would be easy for the nation to fall into riskier investments.

Monetary and fiscal policies made great contributions to fighting inflation in 2022. The reduction of import taxes, especially those on petrol, had great significance in terms of reducing inflation. This, coupled with increasing interest and stabilising exchange rates, helped the country maintain a stable macroeconomy.

However, Vietnam can still do more to remove barriers for firms. For instance, relief measures like reducing VAT could further support the business recovery.

Nguyen Dinh Cung, former director of the Central Institute for Economic Management

The external situation still remains difficult, although it has improved over the past year. Compared to 2021, the global outlook will continue to be bleak, but this is out of our control.

In order to help businesses develop, it is vital to reform internally. According to international best practice and the reality in Vietnam, there is strong pressure and motivation to adapt from the inside amidst the headwinds in the global market.

Although the government has given directions to overcome the challenges, I do not see drastic changes to compensate for the external pressure. Fiscal policy has not been strong enough to support industries, and we have even increased the cost of business activities.

For example, the government has approved a business recovery programme and set aside a large amount of capital. However, the disbursement through the initiative remains at a low rate.

While enterprises face a shortage of capital, fiscal policy is more effective than monetary policy to stimulate demand. We should speed up the VAT refunds for businesses. Given that the external difficulties will last until 2024 and beyond, the government should extend the policy of reducing and exempting VAT until 2025.

Phan Duc Hieu, Standing Member of the Economic Committee of the National Assembly

There is little doubt that domestic institutional reform is important both in the short and long terms.

In the short term, the government should share the burden with businesses, and moving forward, we need to sustain the recovery and development.

In this challenging environment, businesses will be very unhappy if they encounter additional legal barriers. There is a huge demand for administrative reform.

From a government perspective, we saw the issue of Official Dispatch 644 and Resolution 105 on solving the issues. These documents highlight reforms like cutting administrative costs and limiting the issuance of new regulations that create additional expenses for businesses.

What matters is how well these regulations are implemented and how effective they are. Two days ago, the prime minister established a task force on administrative reform. We hope that it will not only monitor the progress but also propose solutions to help businesses overcome obstacles.

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