Workers in a factory manufacturing electronic components of Optrontec Vina Co Ltd in Binh Xuyen Industrial Park in Vinh Phuc province. (Photo: VNA) Withmore and more scientists predicting that COVID-19 may never disappear, globalpolicymakers are trying to avoid further lockdowns and have shifted their focusto recovery. Thus, policies that drive the economy in the long term will be thecentrepiece of the post-pandemic programme.
“Amaster programme on economic recovery and development at this time is verynecessary and needs to be promulgated and implemented soon,” Phan Duc Hieu, aNational Assembly deputy from Thai Binh province and Deputy Director of theCentral Institute for Economic Management (CIEM), told Vietnam News.
Theworld has experienced unprecedented challenges from the COVID-19 crisis in thelast two years and many governments, including Vietnam, have introducedextraordinary stimulus packages to revive their economies.
InVietnam, the total amount of tax and State budget revenue that has beenextended, exempted and reduced in 2020 reached 129 trillion VND (5.6 billion USD).In 2021, besides some policies issued in 2020, more support policies on taxesand fees have been introduced with an estimated scale of about 140 trillion VND.
Theprolonged pandemic has significantly reduced the health of people and thefinancial capacity of businesses. The number of firms shutting down,dissolving, and leaving the market reached the highest level in many years.Several surveys also showed that businesses are facing both financial andmarket difficulties.
Inthe first session of the 15th National Assembly in July 2021, the Governmentwas tasked to study and develop a programme on economic recovery anddevelopment.
“Itshould be noted that this is not simply a stimulus package and has yet to sayhow big it is. However, this economic recovery and development programme mustbe big enough and long enough to spearhead the economy in the long term,” Hieusaid.
Supportmeasures were mostly aimed at tackling urgent situations. The pandemic hasposed unprecedented difficulties for policymakers to issue both timely andeffective solutions, thus many policies in the latter stages have been issuedbased on experience from previous solutions.
Thesocio-economic recovery and development programme this time will befundamentally different from the previous policies in terms of the overall goaland long-term vision.
Hieusaid the plan must include both economic and social solutions, comprisedifferent measures ranging from fiscal, monetary, and technical support andcover different subjects, industries, and fields to not only help restoreproduction and business activities but also create room for sustainabledevelopment in the long run.
“Inprinciple, this programme must ensure the basic requirements: support measuresmust be appropriate, meet the right needs and the right targets; in the longterm create changes in the business model towards a strong digital transformationand sustainable development – with the goal of not following the old path butmust develop strongly on the new road,” Hiếu said.
“Thus,there must be an effective, timely and comprehensive implementation mechanism.”
Policyspace
TheGovernment has only a few choices on its plate right now given shrinking spacefor fiscal and monetary policy.
Accordingto Nguyen Minh Tan, Deputy Director of the State Budget Department under theMinistry of Finance, the efforts to keep the State budget deficit at 4 percentof GDP in 2021 (equivalent to about 5.1 percent of unadjusted GDP) according tothe estimate approved by the National Assembly last November and expected 4 percentof GDP in 2022 is pressuring the State budget balance in the coming years.
Amidthe pandemic challenge, the pressure is great to ensure the average budgetdeficit within 3.7 percent of GDP in the five-year period pursuant to thenational financial plan, public borrowing, and debt payment plan for the2021-25 period adopted in July this year.
Besides,the budget collection is also a challenge in the future given the fact that thebusinesses and economy need a longer time to recover. In its October report,the International Monetary Fund projected the world economy to grow 4.9 percentin 2022, lower than 5.9 percent in 2021.
Additionally,the continued implementation of tax exemption and reduction to supportenterprises and enormous expenditure on disease prevention and control willalso create pressure on the state budget balance, especially the central budget.
Someexperts however believe there is still some room in the design of supportmeasures.
Accordingto Can Van Luc, Chief Economist of the Bank for Investment and Development ofVietnam (BIDV), the budget deficit and public debt have been controlled in theprevious period and are lower than other countries in the region which willprovide the opportunity to increase domestic debt (through the issuance ofgovernment bonds) to collect more resources to finance pandemic control andeconomic recovery.
Lucsaid the current scale of fiscal support is still quite modest so the publicdebt and budget deficit should be increased to supplement support packages,focusing on cash support, fee/cost reduction, credit guarantees andpreferential loans (interest support) rather than tax deferrals and debtrepayment obligations.
However,Hieu cautioned to calculate potential domestic and international macro risksand the efficiency of fiscal and monetary policies.
“Animportant point in minimising macro risks is to pay special attention to theeffectiveness of this programme – the more effectiveness increases, the morerisk decreases and vice versa,” he said.
TheGovernment has assigned the Ministry of Planning and Investment to coordinatewith the Ministry of Finance and the State Bank of Vietnam and relevantagencies to complete the socio-economic recovery and development programme andreport to the Government before submitting it to the National Assembly at itsspecial session in December 2021.
Themaster plan aims at not only solving short-term problems but moreimportantly to bring Vietnam's economy back to a new growth cycle,re-establishing the growth momentum in the medium and long term./.
VNA
