In the context that many economies around the world had received positive signs of growth in the second quarter of 2021, yet still faced with the emergence of a new virus varient and the delay of vaccine deployment, the recovery among countries are inconsistent. The Vietnam Macroeconomic Report for the third quarter of 2021 by the Viet Nam Institute for Economic and Policy Research (VEPR) under the VNU University of Economics and Business has highlighted the main points about the picture of the world economy and Vietnam as follows:
Over the world, the economy is recovering at
a faster pace than expected, causing the prices of many goods to increase
simultaneously since the supply chain could not keep up with the rapidly
increasing trend of world commodity demand. Although trade in goods increased,
trade in services has not yet recovered. Countries deeply involved in the
supply chain benefit (providing medical equipment, medicines and information
technology equipment,...); Countries that rely heavily on services (tourism,
hotels) recover very slowly. Therefore, policies that focus on overcoming the
crisis continue to be implemented, including: spending on the health care
system, fiscal support for vulnerable people, maintaining monetary policy
adapting to systematic risk control.
For Vietnam economy, in the third quarter of
2021, economic growth decreased by 6.17% compared to the same period last year.
This is the lowest growth rate in the past 10 years. The serious economic
decline in the third quarter with heavy socio-economic consequences will take a
long time to overcome. The resilience of businesses and people in areas with
recent outbreaks of epidemics has approached the tipping point.
According to the third quarter Macroeconomic
Report, the success of the economy depends a lot on controlling the epidemic
through vaccination and a really large social relief package, along with strong
and effective disbursement measures, promoting the digital economy and
administrative reform. In this report, VEPR presents two growth scenarios for
the Vietnam economy in 2021.
In the worse case scenario, when the epidemic
is likely to re-emerge, the situation of "opening and closing" the
economy will repeat in some places where infection cases appear, causing damage
to production. Export orders continue to abandon Vietnam due to the inability
to ensure the production schedule, a possible labor shortage, high production
costs, and many industries shrink would cause annual GDP growth to only reach
1.0 - 1.5%. In which, the agriculture - forestry - fishery industry grow from
2.0 - 2.5%; industry and construction grow by 3.0-3.5% and services would
experience a negative growth from negative 1.0 to negative 0.5%.
In the good scenario, the assumption is made
when the whole country has agreed on measures to adapt to the epidemic and
still ensures that the production and circulation of goods are not disrupted.
The production and consumption activities are restored, the economic centers
complete the vaccination plan, the GDP growth of the whole year is forecasted
to reach from 2.0 to 2.3%. In which, the agriculture - forestry and fishery
sector is forecasted to grow by 2.7 - 3.2%; industry and construction 4.0 -
4.5%; service sector grow 0 - 0.5%.
The report stated that the transfer of orders
out of Vietnam by some FDI enterprises or the departure of workers from
production centers may only be temporary. The prospect of economic recovery
therefore depends greatly on the strategy to deal with the pandemic in the
coming time. During the first half of October, the epidemic subsided in many areas,
the vaccination coverage rate was quite high in economic centers. The Government
also took drastic actions to restore activities. The production and business
activities of enterprises and individuals are moving towards the new normal
state, but many businesses have not been able to return to normal operations,
many passenger and freight traffic activities are still suspended.
Therefore, the Report makes a number of
important policy recommendations, including:
Economic activities need to be
"untied" to return to normal activities. It is necessary to focus on
removing difficulties, obstacles and drastic solutions to facilitate the
business sector to return to production and business activities in the fastest
and most effective way. Prioritize solutions to ensure the input factors for
the restoration of production, especially energy. Accordingly, the power supply
to factories needs to be ensured, especially in case businesses have the need
to increase production shifts to compensate for the recent difficult time.
Although the role of the support package is essential, instead of focusing on
the size of the monetary support packages, allowing businesses to operate at
100% capacity early is a meaningful support package. most meaningful and within
the reach of the Government.
Besides changing the "openning"
strategy to effectively adapt to the pandemic, social and fiscal support also
plays an important role in the recovery of the economy. The support packages so
far are very limited and the impact is not really positive, not creating
confidence for businesses and especially employees.
Vietnam may temporarily accept a
higher-than-normal budget deficit in order to secure the people and support
businesses to resume production activities. However, once the pandemic is over,
fiscal disciplines need to be strictly adhered to again to avoid long-term
fiscal and public debt risks.
To support economic growth, localities across
the country need to drastically, consistently and synchronously implement the
Government's Resolution No. 128/NQ-CP promulgating the provisional regulation
"Adapting safely and flexibly control measures of the COVID-19", must
not create inconsistencies in the application of epidemic prevention and
control policies. The most urgent and short-term measure is to make it easier
for people to trade goods and travel to welcome the year-end shopping season.
Because this is the occasion when the total demand of the economy increases
causing the rise in investment and consumption in the last quarter of the year.
In addition, provinces, cities and areas need to implement drastically,
consistently, synchronously and flexibly in applying the contents of Resolution
128 of the Government recently issued. Particularly, areas with positive
epidemic situation such as Ho Chi Minh City, Dong Nai, Binh Duong ... should
boldly give businesses the right of autonomy and self-responsibility for
activities to restore production results along with maintaining anti-epidemic
measures instead of providing many regulations and conditions for businesses.
Besides the above short-term solutions, after
this epidemic, there will be a reversal in FDI flows in countries around the
world, the repositioning of supply chains and global value chains. Therefore,
it is necessary to review the business conditions and environment so as not to
miss the strong economic recovery taking place in the world, while promoting
the comparative advantages and deeper participation of Vietnam in the global
economy and global value chain.
For domestic enterprises, lessons have been
learned in optimizing local sources of raw materials, fuel and materials, as
well as exploiting the domestic market. Vietnam needs to soon find a solution
to promote the domestic trade cycle. It needs to make good use of raw
materials, fuel, input materials as well as output from the domestic market.
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