The garment industry contributes significantly to promoting Vietnam's economic growth. (Photo: VNA) Nguyen Dinh Cung, former Director of the Central Institute forEconomic Management (CIEM), who has witnessed ups and downs of economic reformsin Vietnam during the past three decades, said that it seems to be the hardesttime ever.
Vietnam’s economy has a good start with a growth rate of 5.66% inthe first quarter of this year, the highest rate since 2020. However, whetherthe recovery is firm remains a question, Cung said.
He pointed out a number of problems behind the figures.
The index of industrial production (IIP) lacks stability. Thepurchasing managers’ index was below 50 in March, indicating a contraction. Thenumber of firms quitting the market is also rising.
“The economic recovery in the first quarter lacks a firm ground,”he said.
Statistics of the Agency for Business Registration showed thatnearly 74,000 firms quit the market in the first quarter of this year, up 22.8 %against the same period last year.
Cung said that there was one firm quitting the market for everyfour new firms in the 2018-22 period. However, from 2023 to March 2024, forevery business entering the market, two withdrew.
It is undeniable that both businesses and the overall economy arein significant difficulty, raising a question about future growth, he said.
While exports hardly recover strongly due to external impacts,growth in services – a major driver – is losing momentum on rising inflationbut incomes do not improve much.
Private investment has not returned to the previous level. Foreigndirect investment attraction has been robust in recent years but the averagecapital per project since 2015 is lower than the average of the past 30 years.
Cung said that it is necessary to improve the investment climateof Vietnam to attract huge foreign capital.
With a GDP growth rate target set at 7% per year by 2030, theVietnamese economy needs to expand at 8% per year on average in the next sixyears, requiring hastened efforts to accelerate business environment reforms tocreate a firm ground for economic growth, Cung said.
Vietnam needs a comprehensive institutional reform, he stressed.
Vu Thanh Huong from the VNU University of Economics and Businesspointed out that the economy is facing persistent risks and uncertainties,including escalating geopolitical tensions, economic instabilities, rapidtechnology development, climate change and global fragmentation.
According to Truong Van Cam, Vice Chairman of the Vietnam Textileand Apparel Association (VITAS), although orders are increasing for the garmentindustry, caution remains on rising raw materials, production cost, exchangerates, green requirements of major markets and labour shortage.
Ngo Sy Hoai, General Secretary of the Vietnam Timber and ForestProduct Association, said the timber industry is facing new deforestationregulations of major markets. Complicated procedures, including tax refunds,are also weighing on the industry.
Pham Xuan Hoe, former Deputy Director of the Banking StrategyInstitute, said that small and medium-sized enterprises (SMEs) still strugglewith accessing banking credit. Meanwhile, lending rates remain high. He saidthat a national credit guarantee fund should be founded to support SMEs.
He said that the target inflation can be increased from 4.5% to 5%,if necessary, to create room for monetary policies.
Public investment will remain a major growth driver this year witha plan of disbursing a sum worth nearly 700 trillion VND, a rise of 12% against2023, expert Can Van Luc said.
There is significant room for expanding fiscal policies, he said,adding that the value added tax reduction should be prolonged to the end of2024.
Vietnam should also take the opportunities arising from digitaleconomy, circular economy, green growth, regional linkage, and internationalintegration to promote the economic growth more sustainably, he stressed.
These new growth drivers could help increase GDP by 0.9-1.4percentage point in the context of global slowdown, Luc said.
The World Bank has forecast Vietnamese economy to expand at 5.5%in 2024 and 6% in 2025. The World Bank’s report released on April 23 said thatafter experiencing downturns in 2023, Vietnamese economy has been showing signsof recovery during the first quarter of this year on stronger exports andgradually increasing domestic consumption and private investment.
The Asian Develop Bank has maintained its earlier growth projectionfor Vietnamese economy at 6% in 2024 and 6.2% in 2025 despite lingeringuncertainties in the external environment.
The Vietnamese Government has set the economic growth target at6-6.5% in 2024.
For the 2021-25 period, the country aims to achieve an averagegrowth rate of 6.5-7% per year./.
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