Government puts new economic stimulus package to National Assembly

On behalf of the government, Prime Minister Nguyen Xuan Phuc has just suggested the National Assembly (NA) to consider and promulgate new incentives and policies in order to boost the economic recovery and development, in addition to the existing fiscal and monetary measures currently implemented in favour of the public and enterprises.

The government has proposed the National Assembly to promulgate a new economic stimulus package to support the economy

Notably, “It is proposed that the government should consider the issuance of a new economic stimulus package in the context of the COVID-19 pandemic still raging globally. This will help stimulate domestic consumption, spur on production and business, generate more employment, and reduce unemployment, ensuring sufficient resources for preventing and fighting the pandemic and ensuring social security. Also, this will further consolidate the confidence of people and enterprises,” the prime minister stressed.

The new package is aimed to help the government to effectively implement its dual task of combating the pandemic and developing the economy, ensuring people’s life, and the performance of enterprises.

“Vietnam is quite open to the global economy, so there may be a very high risk of the pandemic resurging. The fight against the pandemic is unprecedented, requiring strong and synchronous measures that can help us cope with it swiftly and flexibly respond to COVID-19 in a timely and effective manner,” PM Phuc stated.

The NA earlier set the target of 6.8 per cent in economic growth this year. However, difficulties caused by COVID-19 at home and in the global market will make it hard for Vietnam to materialise this goal. The government expects the rate somewhere between 4.5 and 5.4 per cent, depending on how global pandemic control plays out and how global economies open again.

Over the past few months, the government has been deploying some drastic measures to support enterprises. Specifically, the State Bank of Vietnam has been deploying a package worth over VND300 trillion ($13 billion) for enterprises and households, in the form of debt payment deferral and preferential loans. The Ministry of Finance has also carried out a VND180 trillion ($7.82 billion) package to support these people and enterprises. The government has also been implementing a VND62 trillion ($2.7 billion) package to support 20 million poor and unemployed people. The government will also use about VND3.4 trillion ($147.8 million) to deploy measures against COVID-19 this year.

The government has applied some bailouts in the past to help people and enterprises out of difficulties. For example, in 2009, in order to prevent an economic slowdown, Vietnam announced fiscal and monetary packages to stimulate the economy. At the time, the stimulus packages were up to $8 billion, accounting for about 12 per cent of the GDP in 2008. The packages included both fiscal and monetary measures.

The stimulus packages were welcomed by businesses who were struggling with recession. Meanwhile, economists said that was the right direction to push economic growth.

Among those measures, the State Bank of Vietnam lowered base interest rate to 7 per cent from 14 per cent in 2008. The government used $1 billion to subsidise 4 per cent of lending interest for enterprises for eight months and another interest rate subsidy for medium- and long-term loans for 24 months. Besides, the government announced credit guarantees for export activities, buying machineries and equipment that serve production activities. The stimulus measures also included tax-cutting measures

To boost investment demand in Vietnam, the government also mobilised $3.4 billion from governmental bonds to invest in infrastructure projects.

In another case, in 2012, the government approved a bailout package worth an estimated VND29 trillion ($1.26 billion) in a bid to rescue the struggling enterprises who could not find output markets for their products and had difficult access to bank loans due to high lending rates.

Specifically, a 30 per cent corporate tax cut will be given to small and medium firms, excluding financial, insurance and lottery companies, together with producers of items imposed with special consumption tax.