Vietnam's economy receives many positive signals in the first 4 months of the year

Social housing apartments in Nam Long residential area, District 7, Ho Chi Minh City

The socio-economic situation in April and the first four months had many positive signals, especially in April, many policies and solutions to remove difficulties issued since the beginning of the year have begun to have an impact.

However, Minister of Planning and Investment Nguyen Chi Dung said that Vietnam's economy still faces many difficulties and challenges. Therefore, the Minister requested ministries, branches and localities to resolutely remove difficulties and obstacles, support production and business, unleash resources, promote development drivers... to strive to achieve the annual growth target of 6.5%.

Many positive signals

Reporting at the regular Government meeting in April 2023, Minister of Planning and Investment Nguyen Chi Dung said that in general, the macro economy in April and the first four months of the year was basically stable. Accordingly, production and business activities, the real estate market, and corporate bonds have had initial changes, which could be a positive signal creating momentum for recovery in the coming time.

In particular, in April, many policies and solutions to remove difficulties issued since the beginning of the year have begun to have an impact. April is also the month entering the period of promoting service activities, especially tourism.

Thanks to that, there have been many positive changes in a number of areas such as the corporate bond market, real estate, public investment, and clearing cash flow bottlenecks in the economy.

According to a report by the BIDV Training and Research Institute, in March and April, the Government continued to identify removing barriers and difficulties, supporting businesses and the economy as the top political task.

Many policies to remove difficulties for key markets such as the corporate bond market, real estate market, social housing market, tourism and resort real estate market... have been issued.

The report also acknowledged that the fiscal policy continues to expand with focus and key points, as recently, the Government issued Decree 12/2023/ND-CP dated April 14, 2023 allowing the deferral of taxes, land rents, reduction of some taxes and fees with a total support package size of about VND 198,400 billion and is proposing to reduce 2% of value added tax.

Regarding monetary policy, following the consecutive reduction of some operating interest rates by 1% in March 2023, in April, the State Bank issued Circular 02/2023/TT-NHNN on debt restructuring, debt deferral, and non-transfer of debt groups (to control bad debt and increase access to capital for people and businesses) and Circular 03/2023/TT-NHNN (amending Circular 16-2021) easing some conditions on lending and corporate bond investment by credit institutions, contributing to solving current difficulties in the corporate bond market.

Along with that, the VND120,000 billion credit package for social housing loans with preferential interest rates, 1.5-2% lower than the market interest rate, has also been officially instructed to be implemented. These policies are expected to partly remove legal and capital difficulties for people and businesses, stimulate credit demand, and support recovery in the coming time.

With many positive policies and efforts from the business sector and localities, many economic indicators in April have changed, showing positive signals and trends, making important contributions to the overall results of the first 4 months of 2023.

Customers shop at Co.opmart supermarket in Hanoi

Specifically, the macro economy continued to be stable, inflation was controlled, major balances were ensured; in which the average consumer price index (CPI) growth rate in the first 4 months increased by 3.84% over the same period, gradually decreasing compared to the first quarter (4.18%) and the first 2 months of the year (4.6%); the core inflation index in the first 4 months changed positively.

The monetary market is basically stable, proactively managing monetary policy, supporting the reduction of lending interest rates, stabilizing exchange rates in accordance with market developments, ensuring safety and liquidity of the banking system.

In the first 4 months, the State budget revenue is estimated to reach 39% of the estimate, of which domestic revenue is 39.5% of the estimate; trade surplus is estimated at 6.35 billion USD (same period last year reached 2.35 billion USD).

The index of industrial production (IIP) has initially shown positive signs. The service sector continues to recover positively. Total retail sales of goods and consumer service revenue in the first four months increased by 12.8%.

International visitors to Vietnam in the first four months are estimated at nearly 3.7 million, 19.2 times higher than the same period last year. The number of newly registered businesses in the first four months reached nearly 50,000, up 0.6% over the same period last year.

Regarding public investment capital disbursement, it is estimated that by April 30, 2023, the whole country has disbursed VND 110,633.6 billion, reaching 15.65% of the plan assigned by the Prime Minister, lower than the same period in 2022 (18.48%), but in absolute terms, it increased by nearly VND 15,000 billion (about 16%) compared to the same period in 2022.

In addition, the business investment environment continues to improve. The Japan External Trade Organization announced the results of a survey on the status of Japanese enterprises investing abroad in 2022, in which 60% of enterprises participating in the survey said they would expand their business activities in Vietnam in the near future.

According to the latest Business Climate Index (BCI) report of the European Chamber of Commerce in Vietnam (EuroCham), European businesses have had positive assessments of Vietnam's economic future.

However, the leader of the Ministry of Planning and Investment stated that, in addition to the achieved results, Vietnam's economy still has some difficulties and limitations due to external influences. Production and business continue to face many difficulties and challenges; exports decrease, the economy's ability to absorb capital is difficult; and the pressure on macroeconomic management increases.

Deputy Minister of Planning and Investment Do Thanh Trung also pointed out that the first quarter of 2023 is one of the first quarters with a low growth rate, only higher than 2020-2021.

The main growth driver of the first quarter of 2023 is the decline in the industrial and construction sectors, especially the manufacturing and processing industry.

During the quarter, major manufacturing centers and construction industry were affected and about 7 localities had relatively low growth rates, including 3 localities: Ho Chi Minh City, Thai Nguyen, and Bac Ninh.

The reason is due to the general context and besides the driving force of the decline in the manufacturing and processing industry, some other areas such as total demand decreased, including total retail sales; demand, import-export growth rate, total import-export turnover, market, foreign investment attraction and specific areas of these localities also decreased.

Most recently, the Prime Minister worked with Ho Chi Minh City and pointed out some very specific reasons. Previously, Ho Chi Minh City normally had about 70-80 projects a year for approval of policies and social investment.

However, in the past 2 years, the number of new projects approved has been very low. This problem is related to management capacity, as well as not daring to think, not daring to do…

Many solutions to revive growth momentum

According to the report of BIDV Training and Research Institute, despite achieving some positive results in the first 4 months of 2023, Vietnam's economy still faces a series of major risks and challenges; of which 4 main risks and challenges from the outside still exist. These are:

COVID-19 and other epidemics are still latent, with the risk of re-emergence; geopolitical tensions and strategic competition between major countries persist; inflation has decreased but interest rates remain high, causing the world economy to slow down and demand to decrease significantly;

The collapse of several banks in the US and Switzerland has increased the risks of the global financial market, the risk of bad debt and default in the world has increased. These risks and challenges have negatively impacted Vietnam's exports, investment, consumption, international tourism and financial-monetary markets.

Construction of the Rach Gia - Hon Dat coastal road through Hon Dat district, Kien Giang, using public investment capital

At the regular Government meeting in May, Prime Minister Pham Minh Chinh stated that in the context of the forecast that the international situation in the coming time will remain complicated and unpredictable; and that difficulties and challenges will continue to increase domestically, the tasks set are extremely heavy. Accordingly, the Prime Minister assigned tasks to each ministry and sector with the view of prioritizing growth promotion while remaining consistent with the goal of macroeconomic stability.

In particular, the Ministry of Planning and Investment researches, develops and proposes a Program to promote economic growth drivers; promptly has mechanisms and policies to attract investment; submits to the Government for consideration and promulgation of a Resolution on tasks and solutions to remove difficulties for production and business, stabilize the macro-economy, control inflation, promote growth, ensure major balances of the economy and social security in the new situation.

The Ministry of Finance urgently completes the dossier of the National Assembly's Resolution on the policy of reducing value-added tax; thoroughly resolves problems and shortcomings in the delay in implementing value-added tax refunds; promptly proposes measures to handle problems related to ODA capital.

The State Bank continues to direct and direct credit institutions to reduce costs, accompany people and businesses in difficult times, stabilize and reduce lending interest rates, and direct credit to production and business sectors, priority sectors and growth drivers of the economy.

The Ministry of Industry and Trade promotes the recovery and development of industrial production; proposes mechanisms and policies to encourage, support and facilitate production enterprises to meet domestic market demand and participate more deeply in the international production chain.

The Ministry of Agriculture and Rural Development coordinates with relevant agencies to open up the market for agricultural goods...

Deputy Minister of Planning and Investment Do Thanh Trung proposed that to create momentum for growth, localities need to improve the capacity and quality of direction and administration, and work handling of local authorities at all levels, while at the same time stepping up inspection, supervision, and further improving the investment and business environment so that civil servants dare to think and dare to do.

Along with that, localities need to promote disbursement of public investment capital; at the same time, promote services and tourism, especially in large centers such as Hanoi and Ho Chi Minh City. This is the second driving force for growth, besides service industry and public investment.

In order to create favorable conditions for businesses, Deputy Governor of the State Bank of Vietnam Dao Minh Tu said that the State Bank will continue to operate monetary policy flexibly and reasonably, ensuring the main goal of controlling inflation, stabilizing the value of the currency and ensuring harmony between exchange rates and interest rates.

"Managing interest rates in the spirit of advocacy, directing commercial banks to continue cutting costs to create the best conditions for businesses and people to borrow capital," Deputy Governor Dao Minh Tu emphasized.

Staff working at Saigon Thuong Tin Commercial Joint Stock Bank - Sacombank

Regarding the key tasks and solutions in the coming time, Minister Nguyen Chi Dung emphasized that the Ministry will closely follow the management viewpoint and the main tasks and solutions in Resolution No. 01/NQ-CP on the main tasks and solutions to implement the Socio-Economic Development Plan, State budget estimates and improve the business environment, enhance national competitiveness in 2023, the Socio-Economic Recovery and Development Program, and the directions of the Government and the Prime Minister.

This is to promptly issue and quickly and effectively implement fiscal, monetary and other macro policies and solutions to maintain macroeconomic stability, control inflation, ensure major balances, ensure social security, resolutely remove difficulties and obstacles, support production and business, unblock resources, promote development drivers, especially dynamic localities, and strive to achieve the annual growth target of 6.5%.

Along with that, the Ministry will also proactively handle according to its authority, promptly report and recommend to the Government and the Prime Minister appropriate orientations and solutions in managing, directing, operating growth and stabilizing the macro economy.

Ministries, agencies and localities promote administrative reform, administrative procedures, reduce and simplify business conditions, and improve the investment and business environment.

"Absolutely do not issue new policies and regulations that create unnecessary costs, procedures, and time for businesses and people," Minister Nguyen Chi Dung emphasized.

According to Vietnam+