Macroeconomic Performance Remains Steady

9:46:47 AM | 6/23/2021

Macroeconomic stability, controlled inflation, the 5-month consumer price index (CPI) growth of 1.29% - lowest since 2016, created room for price management targeted at CPI growth of less than 4%, said Minister of Planning and Investment Nguyen Chi Dung at the 57th Meeting of the National Assembly Standing Committee on June 15, 2021.

Despite numerous difficulties, the socio-economic performance in the first months of the year continued to fare well and achieved remarkable results, said Minister Dung.

In the face of the COVID-19 pandemic, Vietnam is the only country in the world that all three world-renowned international credit rating agencies - Moody's, S&P and Fitch - simultaneously upgraded the outlook to "Positive".

The gross domestic product (GDP) was forecast to reach nearly 4,000 trillion (US$170 billion) in the first six months of 2021, about 5.8% higher than a year ago, but 0.42 percentage points lower than the target stated in the Government's Resolution 01/NQ-CP (up 6.22%) and 0.12 percentage points lower than the updated target of the Government (up 5.92%), said Minister Dung.

Agricultural production was estimated to rise by 3%; industrial production and construction by 7.85%; and services by 5%. Consumption continued to extend the recovery, with total retail sales of goods and services forecast to grow by 7.1%.

However, the GDP growth in the first quarter and in the first half of 2021 failed to reach the target. Imports and exports still depended on a few markets. The FDI sector’s share of exports was still high. The trade balance tended to be inclined to deficit (US$369 million in the first months). Merchandise import and export were congested at times. Financial, property, securities and gold markets were posed to potential risks.

By the end of May 2021, 15.6% of the planned public investment fund from the central budget was not been detailed for allocation by central and local authorities as they needed to have the medium-term central public investment plan 2021-2025 adopted. The disbursement of centrally planned investment funds in the first five months of 2021 was still slow, reaching 22.12% of the plan, lower than in the same period last year (25.98%). The foreign disbursed fund was very low, only 2.97%.

The licensed FDI value reached US$14 billion, but the number of new projects, fund-added projects share purchase deals shrank by more than 50%, showing that there were still many difficulties in FDI attraction.

Business operations were forecast to be in difficulty. The number of newly registered enterprises rose as low as 1.6%, but the value strongly surged 34.8%. More companies filed for bankruptcy.

The world economy was forecast to extend the recovery in the second half of 2021 but risks and challenges still exist, particularly when the COVID-19 pandemic development is still complicated, said Minister Dung. Vaccinations are unequal among nations and economies. Meanwhile, the economic performance will be also affected by volatile financial markets, security and diplomacy.

The Vietnamese economy was forecast to grow well in 2021, according to many well-reputed organizations. The driving force for economic growth this year comes from industry and the service (particularly manufacturing), increased investment and expanded trade by making effective use of signed trade agreements.

However, the prospect of domestic economic growth in the last months of the year is still risky and challenging because, according to Minister Dung, in order to achieve the highest goals assigned by the National Assembly, the Government directed all levels and branches to drastically and effectively implement proposed tasks and solutions, including rapid change in thinking, awareness and administration, and firmly grasped new developments to make timely, accurate and effective decisions.

The government directed the consistent and effective implementation of "dual goals" - preventing the pandemic and protecting people's health and promoting socioeconomic development; regularly reviewed and promptly took effective measures to remove institutional obstacles to mobilize all resources for national development; and actively deployed timely support solutions for people and businesses affected by COVID-19, especially workers in industrial zones who lost their jobs.

At the same time, it strengthened measures to tighten financial and budgetary discipline, accelerate public investment disbursement; urgently grasped situations to adjust appropriate solutions to attract FDI; closely monitored price movements to analyze, forecast and review growth scenarios, and promptly proposed solutions to control inflation; actively implemented measures to handle bad debts; and developed diversified banking credit products.

The government actively supported digital transformation for Vietnamese businesses in all fields, built practical, effective, focused digital economy and digital society; and took measures to support enterprises in industrial parks and economic zones to effectively prevent and control the contagious pandemic, ensure business activities and avoid production and supply chain disruptions.

By Anh Mai, Vietnam Business Forum