Fiscal and monetary policies should be coordinated to promote the recovery of financial market

Scene of the conference. Photo: Thùy Linh

Need solutions to develop financial markets

Speaking at the conference, Assoc. Prof. Dr. Nguyen Nhu Quynh, Director of National Institute for Finance, said that the Covid-19 pandemic along with geopolitical tensions has caused global economic and financial challenges as well as affected economic recovery and development.

In Vietnam, aiming to accelerate the economic recovery process and stabilize the macro-economy and people's lives, the Government has issued many resolutions to support socio-economic recovery and development such as Resolution No. /NQ-CP on the main tasks and solutions for the implementation of the socio-economic development plan and the state budget estimate in 2022; Resolution No. 11/NQ-CP dated January 30, 2022 on the socio-economic recovery and development program and the implementation of Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the program with the common goal of improving competitiveness, resilience and quick recovery from the current crisis, minimizing negative impacts of the pandemic, and preventing negative impacts from the economy world economy, dealing with energy crises, supply chain disruptions, and geopolitical tensions

The above goals have increased pressure on the financial system in general and the financial market in particular in supporting economic recovery.

According to Assoc. Prof. Dr. Nguyen Nhu Quynh, the components of the stock market including the stock market, bond market, derivatives market, etc., is a solid basis for the financial market from now to 2025 and towards 2030

The capital market size grew at an average rate of 28.5% in the 2016-2021 period; and by the end of the first quarter of 2022, it accounted for 134.5% of GDP. In particular, the stock market accounted for 93% of GDP, government bonds accounted for 22.7% of GDP.

Currently, the stock market has 757 listed fund stocks, 858 businesses registered to trade on UpCom and more than 5. 2 million investor accounts. From April 2022, the market has adjusted, but the scale in the first five months of the year still reached VND11,747 billion/session; transactions increased by 8.1% compared to the average of 2021. This is a very impressive figure for the capital market.

"The financial market still has many shortcomings and limitations such as underdevelopment, affected by psychology and the influence of the world currency market. In addition, the mobilization of capital from corporate bonds still has many problems, especially in real estate businesses, leading to risks for investors and issuers. So, it is necessary to have solutions to develop the financial market, capital market and stock market on the basis of reviewing the Law on Securities and the Law on Enterprises to deploy management solutions," Mr. Nguyen Nhu Quynh said.

Need to closely coordinate fiscal and monetary policy

Speaking at the seminar, Mrs. Le Thuy Dung, Faculty of Finance and Banking (University of Commerce), said that fiscal and monetary policy played an important role in supporting liquidity for individuals and businesses as well as maintaining the existence of businesses in the short term

For example, in China, monetary policies focused on creating liquidity in the market such as performing open market operations, reducing lending rates and rediscount rates; reducing interest rates on excess reserves; increasing the credit limit of private enterprises; implementing a 0% interest program for loans of local banks, and loosening lending conditions of banks.

In parallel, in terms of fiscal policy, China deployed a budget spending package worth 4.9 trillion yuan to support economic development; 400 billion yuan for an extra-budgetary expenditure package to guarantee loans for small and medium enterprises.

“The application of fiscal and monetary policy in the context of the Covid-19 pandemic depends on resources, capacity to use existing policy tools and the nature of risks that each country faces. However, countries tend to use a combination of fiscal policy tools from the beginning with monetary policy tools, in which, fiscal policy mainly uses expenditure measures directly from the budget for individuals who are affected by tax reduction," Mrs. Le Thuy Dung said.

According to the National Institute for Finance, in order to continue to develop healthy and efficient financial markets, it needs to have close coordination between fiscal policy and monetary policy, along with the interoperability between the capital market and credit market to ensure market stability, macroeconomic stability and major balances of the economy.

On the other hand, conducting an overall review of the provisions of the Law on Securities, including the scope of public issuance, private placement, and the concept of securities investors.