Asian Development Bank (ADB) Country Director for Vietnam Andrew Jeffries (Photo: VGP) Jeffries made that statement in a recent interview granted to the Vietnam Government Portal (VGP)regarding Vietnam’s macro-economic prospects amidst the COVID-19 pandemic outbreaks.
Three key drivers of Vietnam's economicgrowth
Jeffries highlighted that Vietnam’s economicgrowth is expected to growth by 6.7 percent in 2021 and 7.0 percent in 2022 - strongand steady growth made possible by Vietnam’s success in containing the COVID-19pandemic.
Inflation will be under control, despite anexpected rise to 3.8 percent this year and 4.0 percent in 2022 due to risinginternational oil prices on the global economic recovery and increased domesticconsumption, he added.
The ADB Country Director referred to the driversof this growth, including industry, driven by export-oriented manufacturing, increasedinvestment (private and public investment) given accommodative fiscal andmonetary measures, and expanding trade, thanks to the faster-than-expectedrecoveries in China, the US, and Vietnam’s participation in 15 major free tradeagreements involving all advanced economies.
Regarding the Vietnamese Government’s supportpackages for enterprises and people affected by COVID-19, he asserted that theGovernment has responded swiftly to the COVID-19 economic impacts, which wassupported by strong fundamentals, thus ensuring the economy’s resilience.
The accommodative monetary policy through keyinterest rate cuts together with the implementation of credit package andfiscal support measures have provided breathing space to affected businesses,including small- and medium-sized enterprises (SMEs).
However, the credit support has been mainlyarranged and provided by commercial banks, said Jeffries, adding that the bulkof the increases of liabilities have been shouldered by the commercial banks,but they still have to apply required lending standards, especially when thebalance sheets of affected firms are being deteriorated.
Without risk sharing by the Government, banksmay have been reluctant to provide more loans to affected firms, he emphasised.
A more sustainable long-term strategy isneeded
Mentioning Vietnam’s measures to supportbusinesses and people to overcome negative impacts of COVID-19, Jeffries saidthat the State Bank of Vietnam has instructed the banks to extend theimplementation of credit support measures to the end of 2021.
The Government also allowed extending thedeferral of taxes and landing rental in 2021 to further reduce the shock’simpacts and support economic recovery, he said, stressing that the long-termeconomic recovery is being fleshed out by the Government.
However, he supposed that the support wasmainly in the form of deferral of taxes and land rental, and size of thesupport remained modest, as compared with other countries with fiscal supportof up to 15 percent - 20 percent of the GDP, like in France, the UK orSingapore.
Among others, the emerging long-term economicpriorities after the COVID-19 are the imperatives to build an economy which isresilient to internal and external shocks which have become more frequent inrecent decades; broad-based that can help reduce disruptive impacts fromexternal crisis; and digitally able to strengthen economic competitiveness andefficiency, the ADB Country Director proposed.
An ADB study suggests that there is a hugeimpact of COVID-19 on income and poverty of Vietnamese households. For example,the impact of the pandemic will reduce household per-capita income on average by9.8 percent, and the poorest income group will suffer a 10.2 percent incomedrop, while the poverty rate of households in the poorest income quintile willrise by 40 percent.
There will be an additional 1.7 million poorpeople due to the pandemic, and those living in rural, remote areas and ethnicminority people will be more severely affected.
Cash transfer in Resolution No. 42/NQ-CPdated April 09, 2020 assistance for people affected by the COVID-19 pandemicshould be a short-term solution to over income shock, said Jeffries.
A more sustainable long-term strategy shouldbe to help the poor and vulnerable to diversify their livelihoods through, forexample, short-term vocational training and improved access to microfinance forestablishing new businesses, he suggested.
Recommendations for Vietnam to achievedual targets
In short-term, Jeffries indicated that themajor downside risks are the pandemic re-emerging from new coronavirus variantsand delays in the Government’s vaccination plan.
A faltering global COVID-19 vaccine rolloutcould have an immediate impact on Vietnam being able to return to its strongpre-pandemic growth path given the country’s reliance on external demand.
The fast revival of domestic privateinvestment may also heighten the risk of asset bubbles if credit is notchanneled to productive sectors.
Meanwhile, in the medium and long-term, mainchallenges facing Vietnam include climate change impact, unfinished reforms(financial sector reform and SOE reform), and low labor productivity, heunderlined.
The ADB Country Director recommendedVietnam to reset the growth momentum to achieve green recovery in themedium-term and green growth in the long-term, given the daunting impact ofclimate change on Vietnam in the decades to come.
Strengthening institutional efficiency is thekey to unlock the private sector’s potential to support growth, he said.
Accomplishing unfinished business reforms(financial sector reform, and SOE reform), improving the quality, transparency,and enforcement of laws and regulations, and simplifying businesses conditionsare all critical to improve institutional efficiency for private sectordevelopment, Jeffries advised.
He stressed the significance of promotingdigital transformation to improve productivity by investing on education,technology, and innovation./.
VNA
