|The NA’s policy on a national programme on socioeconomic recovery is expected to support many domestic enterprises, photo Le Toan |
Never in the past few decades has the National Assembly (NA) had to convene an extraordinary session as it has been doing since last week, just two months after it concluded its second session of the 15th NA.
“This meeting is vital to the economy and domestic production,” said NA Chairman Vuong Dinh Hue. “Enterprises and people are in critical need of more support as they are bogged down in great difficulties.”
The growth rate for the whole of 2021 is estimated to be 2.58 per cent – the lowest level since the early 1990s, with a rate of 4.72 per cent for Q1, 6.73 per cent for Q2, and -6.02 per cent for Q3, mainly due to the ongoing pandemic effects.
According to a governmental report sent to the NA, the pandemic is damaging national socioeconomic development plans for the rest of the decade, including when it comes to growth targets.
“Without more fiscal and monetary solutions to support the economy, it is forecasted that the average annual growth rate for the 2021-2025 period will be 5.4 per cent, far lower than the set target of 6.5-7 per cent a year, meaning risks of lagging far behind the region and the wider world,” stated the report.
Each percentage of growth can create 350,000-400,000 new jobs.
Many NA deputies have requested the government to extend more assistance to struggling enterprises and millions of unemployed labourers.
“Tens of thousands of enterprises had to stop operations, while tens of millions of labourers have become unemployed. This shows that the economy’s resilience is very weak, and enterprise health has been quite exhausted,” said NA deputy Hoang Van Cuong, representing Hanoi.
In Q3 alone, more than 28.2 million people nationwide aged from 15 and up suffered from unemployment, with incomes slashed and stopped. As compared to Q2, the number of labourers in this position increased by another 15.4 million people.
According to the General Statistics Office, in 2021, Vietnam saw 116,800 newly-established enterprises registered with $70 billion and 584,000 new labourers – down 13.4 per cent in the number of enterprises, 27.9 per cent in registered capital, and 18.1 per cent in the number of labourers, as compared to 2020.
Moreover, in 2021, the numbers of businesses halting performance, and stopping operations to wait for dissolution reached nearly 55,000 and 48,100, up 18 and 27.8 per cent on-year, respectively. On average, each month saw 10,000 enterprises withdraw from the market.
Thirsty for support
Two months ago, the NA adopted the Socioeconomic Development Plan for 2022, with an expected growth rate of 6-6.5 per cent, and per capita income of $3,900. One of the key solutions to realise these targets is to further assist businesses and individuals and increase the disbursement of public investment.
However, NA deputy Dang Bich Ngoc representing the northern province of Hoa Binh said that it is necessary to clarify how enterprises and individuals will continue getting support so that they can recover and develop.
“It is suggested that the NA and the government soon enact a comprehensive programme on socioeconomic recovery and development,” Ngoc said. “There have been some bailouts for enterprises, but they remain insufficient and slow in implementation. Meanwhile, enterprises are in critical need of support, and I think that new bailouts need to be implemented until at least 2024.”
It is estimated that last year, all fiscal solutions for supporting enterprises and people hit by COVID-19 were valued at over $8 billion or 2.2 per cent of GDP. Moreover, some other measures were also applied in the form of reduction and exemption of fees for telecommunications services, schooling, electricity, and insurance, worth $3.63 billion.
Thus all supporting policies are valued at over $11.63 billion or 3.2 per cent of GDP.
The kiss of life
It is expected that the NA will this week adopt a resolution on fiscal and monetary policy to support the national programme on socioeconomic recovery and development for 2022-2023, at an initial estimated value of $15 billion.
This is aimed to drive the economy to a higher level of growth, to around 6.5-7 per cent for 2021-2025, with focus to be placed on supporting enterprises and people as well as increasing infrastructure funding.
The $15 billion is expected to be mobilised from saved recurrent spending, government bond issuance, non-budget state-owned financial funds, and foreign exchange reserves funds, as well as loans from financial institutions. Notably, it is suggested that budget overspending be increased by $10.43 billion in the 2022-2023 period.
The mobilisation of capital for the programme will increase budget overspending by another 1.2 per cent of GDP annually in 2022-2023, public debt to 49-50 per cent by late 2025, and government debt to 45-46 per cent of GDP by late 2025.
The national programme on socioeconomic recovery and development covers five key components. These are reopening the economy pertaining to enhancing medical capacity ($2.6 billion); ensuring social welfare and employment ($2.31 billion); assisting recovery of enterprises, cooperatives, and business households ($4.78 billion); developing infrastructure and unlocking social resources ($4.95 billion); and increasing institutional and admin reform. Moreover, another $434.8 million will be mobilised from non-state budget financial funds.
Highly valuing Vietnam’s efforts to boost economic recovery via such a large-scale recovery programme, Andrew Jeffries, country director for Vietnam at the Asian Development Bank (ADB) told VIR that the government has responded swiftly to economic impacts, supported by strong fundamentals, and has been instrumental in ensuring the economy’s resilience. The accommodative monetary policy through key interest rate cuts, together with the implementation of credit package and fiscal support measures, have provided breathing space for affected businesses, including small- and medium-sized enterprises.
“However, credit support has been mainly arranged and provided by commercial banks. The bulk of the increases in liabilities have been shouldered by the commercial banks, but they still have to apply required lending standards, especially when the balance sheets of affected firms are being deteriorated,” Jeffries said. “Without risk-sharing by the government, banks may have been reluctant to provide more loans to affected firms.”
According to the ADB, there has not been sufficient financial support from the government. The support was mainly in the form of deferral of taxes and land rental, and the size of the support remained modest as compared with other countries. For some businesses that have been heavily affected by the pandemic with revenue deterioration and no profit, deferral of VAT and corporate income tax have had less of an impact than the tax cuts.
According to the World Bank, Vietnam needs to pay more attention to supporting those vulnerable to the pandemic and boosting infrastructure development, which will help the country create more jobs and consume more goods and materials.
“Fiscal policy interventions would help, including through tax relief, acceleration of investment project implementation, and social assistance to the needy. In this light, the approved VAT reduction for businesses in travelling, hospitality, and entertainment in November and December of 2021 is expected to have helped boost weak domestic demand in this subsector,” the bank said in a recent bulletin on Vietnam’s economy. “As the economy re-opens and the number of new confirmed cases is increasing, continued rapid pace of vaccination and vigilance in testing and quarantining should help avoid a new wave of infections forcing new restrictive measures to protect lives.”