Stronger actions needed for economic rebound

Tran Quoc Phuong, Deputy Minister of Planning and Investment

Vietnam’s GDP just expanded 0.36 per cent in the second quarter, and grew 1.81 per cent in the first half of this year. How do you assess the situation?

In fact, the GDP growth was modest in the second quarter and the first half of this year. But amid the current volatile situation with many countries struggling in the fight against COVID-19 and negative growth, it is still remarkable that the country’s GDP expanded 1.81 per cent in the first six months.

Albeit such a growth level was the lowest in the past several decades, Vietnam remains one of the few countries with positive growth in first-half period.

More significantly, despite this low GDP growth, Vietnam has succeeded in maintaining a stable foundation for macro-economic development – a decisive factor to ensure recovery and development of the local economy in post-pandemic times. With this attainment, in the first half this year our country has basically fulfilled the dual task of successfully containing the pandemic and achieving economic rebound at a rational level.

As the new normal has gradually been established in socio-economic life, several indicators in terms of mobilised capital volumes for investment development, new business setups, or market purchasing power have shown upbeat signals.

What are the latest challenges to Vietnam’s development?

The modest GDP growth of 0.36 per cent in the second quarter is concerning. This low growth was chiefly attributable to disruptions in our export markets. In fact, growth mostly concentrated in June as we spent almost the whole April on social distancing, leading to stagnation in development.

However, similar to the second quarter, if the pandemic continues to plague the world, Vietnam’s economy could face even more hardships. Currently, the economy is open with heavy reliance on imports and exports, so obtaining high growth rates in the last quarters proves to be unrealisable unless the pandemic is successfully contained.

Along with Vietnam, the global economy is in the doldrums. International organisations like the International Monetary Fund (IMF) or the World Bank have scaled down global growth forecast to -4.9 per cent, and then -5.2 per cent, the lowest level since the Great Depression. Meanwhile, these entities still hold a positive development forecast for Vietnam’s economy. Along with this, the IMF put Vietnam’s growth at 2.7 per cent in its forecast, and that from the World Bank at 2.8 per cent, and from the Asian Development Bank at 4.1 per cent.

Albeit enjoying rosier growth prospects, it is undeniable that Vietnam is facing a subdued growth threat due to the adverse implications of the pandemic and global economic recession.

In addition, there are concerns that the consumer price index could continue to stay at high levels, and the dragging pandemic would leave sweeping affects across the board, such as on tourism, transport, import and export, as well as putting risks to the output market for firms’ production and business activities.

Beyond these short-term risks, the current global standing is posing major challenges also in the medium and long term to Vietnam’s economy. We cannot open the door to the world unless the pandemic was successfully contained in foreign countries.

If the pandemic came back due to our subjective mind and underestimation of the threat as seen in several other countries, the consequences would be enormous.

Hence at this point of time, we need to take further actions to rein in the pandemic, simultaneously prop up growth, and propel economic development. Towards this goal, it is essential to take swifter and stronger actions right now.

What proposals has the Ministry of Planning and Investment (MPI) recommended in respect to macro-economic monitoring?

At the online meeting of the government with localities on July 2, the MPI proposed to the government to strictly apply a new principle in taking actions striving for a quick rebound and development. The message is that fighting economic depression must be like fighting the enemy, similar to the spirit we had exercised while combating the coronavirus.

The MPI has also recommended to form a national steering committee soon whose core function would be curing the economic depression in post-pandemic times, aiming to ensure a quick implementation of the tasks and measures that underpin growth rebound.

Another focus lies on taking strong actions to fuel demand and consolidate the fundament of the domestic market, pushing up trade promotion, and encouraging local firms to avail of the advantages from free trade agreements that have come into force.

Last but not least, to spur growth until the end of the year, it is important to accelerate attraction and disbursement of investment sources of the whole society, particularly public investment sources, besides fostering investment attraction on a selective basis and amid international co-operation.