Flexibility neccessary to meet GDP targets

Targets in labour productivity for 2021 may fluctuate depending on a wider global context, photo Le Toan

The National Assembly (NA) last week adopted the Resolution on Socioeconomic Development Plan for next year, setting economic growth at about 6 per cent.

This rate was earlier designed by the government and discussed by the legislature as it is one of the key indicators for how strong and resilient the economy is, with its capacity to generate employment and invest into public works in service of individuals and enterprises.

Prime Minister Nguyen Xuan Phuc told the NA, “This 6 per cent remains humble because of risks that may continue to be caused by COVID-19 which has and will likely dampen local production and business, and the global economy as well. To achieve this rate, we must continue applying a dual policy of pandemic controlling and economic recovery.”

He said despite the adopted economic growth rate of 6 per cent for 2021, the government will continue “closely monitoring the situation to apply different scenarios so that the economy can achieve the best growth.”

Remaining positive

Latest figures from the Vietnamese government showed that in 2020, if the economy grows 2-3 per cent, its GDP is estimated to be about VND6.3 quadrillion ($273.9 billion), up by VND263 trillion ($11.43 billion) against 2019, lower than the on-year increase of nearly VND500 trillion ($21.74 billion) last year.

Thus if the economy grows 6 per cent next year, total GDP is estimated to be VND6.678 quadrillion ($290.34 billion) – based on the current calculation methods. If a new calculation method is applied for 2021, the GDP size is expected to be 25 per cent higher than the existing figure.

Each percentage of growth is estimated to be able to help generate about 500,000 direct jobs.

According to a government report, one of the key propellants for Vietnam to reach the ambitious 6 per cent growth rate this year is that the government will continue implementing “suitable monetary and fiscal policies to stimulate aggregate demand, and remove difficulties for production and business.”

A month ago, the International Monetary Fund (IMF) released its latest forecast that Vietnam will be among a few nations expected to see positive economic growth this year, at 1.6 per cent, before bouncing back to 6.7 per cent in 2021. GDP for 2020 will likely be over $340 billion, higher than Singapore’s expected $337 billion.

Moreover, the IMF also predicted that this year Vietnam’s per capita average income will increase from $3,416 last year to about $3,500 this year.

However, many NA members have recommended that the government formulate different growth options with specific feasible measures to make it more favourable in macro monitoring.

Showing caution, NA deputy Duong Van Thong representing the northern province of Yen Bai noted that a year ago the NA originally set a target of 6.8 per cent in economic growth for 2020, before the coronavirus pandemic occurred. More than five months ago, the government set two scenarios for economic growth this year, with the lowest expected rate of 3.6 per cent and the highest at 5.2 per cent.

“However, these scenarios have become infeasible due to the complicated developments of COVID-19 worldwide,” Thong said. “Thus it is recommended that the government be more flexible in macro monitoring, with more suitable scenarios for growth,” Thong said.

Echoing this view, NA deputy Tran Hoang Ngan representing Ho Chi Minh City also underlined the need to take great caution when considering the economic growth for 2021. He took the value of GDP and state budget revenue as an example.

Nguyen Chi Dung - Minister of Planning and Investment Some National Assembly (NA) members have shown their concerns that the proposed 6 per cent growth rate for 2021 is relatively high and difficult to realise. As the government has reported to the NA, in 2021 it is forecast that our country will have to continue facing numerous difficulties and challenges coming from outside. There will also be many risks and uncertainties, in addition to competitions among major nations, with the global economic recession caused by COVID-19’s far-reaching and prolonged effects. At home, the pandemic remains complicated. However, we also see many opportunities and potential that our country can tap into to develop strongly, such as positive impacts from free trade agreement, including the EU-Vietnam Free Trade Agreement, and opportunities to attract foreign direct investment from the shift of international capital flows, digital transformation, e-commerce, and the development of new business models and sectors, as well as from our country’s plentiful and dynamic human resources. If we can radically take advantage of all these opportunities and overcome the economy’s internal difficulties, it is likely that we can achieve high economic growth in 2021 and in the 2021-2025 period. Moreover, economic growth expected to be low in 2020, at about 2-3 per cent, is also a foundation for us to formulate a higher growth rate for 2021. This is suitable to some international organisations’ fresh forecasts for Vietnam’s economic growth and also suitable to the growth performance of many nations in the world. The fact that we have set a 6 per cent growth rate for next year is also an impetus for us to make greater efforts to achieve higher growth, laying firm groundwork for socioeconomic development for the 2021-2025 period. As for the socioeconomic development plan for 2021, we agree with some of the ideas from NA members. It is necessary to formulate a number of scenarios to timely cope with pandemic developments. Besides that, the immediate focal task is to overcome aftermath caused by COVID-19, recover domestic production, and stabilise the life of those in stormy and flooded areas.

Varying estimations

Initially, GDP for 2020 was planned to be VND6.8 quadrillion ($295.65 billion). But as it stands, the figure may hit VND6.3 quadrillion ($273.9 billion), meaning the country could lose VND500 trillion ($21.74 billion).

Moreover, state budget revenue was initially planned for 2020 to be over VND1.5 quadrillion ($65.21 billion), but if great efforts are made, the figure may reach VND1.3 quadrillion ($56.52 billion), a loss of VND200 trillion ($8.7 billion). The budget deficit is estimated to increase by another VND84 trillion ($3.65 billion).

“This calculation shows that the aftermath from COVID-19 is huge, and we need to take great caution for formulating the economic growth target for 2021 and beyond,” said Ngan, also an economic expert. “That’s why the government needs to have many different growth scenarios.”

He suggested that the best scenario is the one in which COVID-19 is controlled, with an anti-pandemic vaccine widely applied and the global economy recovering. If this factor happens, Vietnam’s growth rate of 6 per cent for 2021 is feasible.

However, there should also be a negative scenario, he said, in which there will be no anti-pandemic vaccine, with the return of COVID-19, and the global economy continuing falling into a deeper recession. In this case, Vietnam’s economic growth rate for 2021 may be only 4-4.5 per cent.

Meanwhile, NA deputy Nguyen Van Chien, representing Hanoi, also said that the number of COVID-19 infections has been soaring on a daily basis in the world, threatening Vietnam’s economic growth.

“We cannot forecast when the pandemic will end and what more aftermath it will cause. The global economy has fallen into a serious recession which could lead to a crisis in energy, fuel, and finance in Vietnam. Thus, updated scenarios for economic growth in Vietnam must be made frequently,” Chien proposed, adding, “One of the key solutions to achieve higher growth next year has to be placed on further improving the domestic business climate. Enterprises are facing massive difficulties and need state support.”