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Despite high growth, the economy has not returned to its full potential in 2022. Photo: T.D

According to the World Bank (WB), GDP growth is forecast to increase sharply from 2.6% in 2021 to 7.5% in 2022, while inflation is forecast to increase by an average of 3.8% this year.

Powerful recovery

Assessing Vietnam’s socio-economic situation, Deputy Minister of Planning and Investment Tran Quoc Phuong said that since the beginning of 2020, the world situation has changed quickly, complicatedly, and unpredictably with many unprecedented developments, beyond the forecasting ability of international organizations and countries around the world; risks and uncertainties are increasing, changes in policies are increasing rapidly. The situation of major countries, major trading and investment partners of Vietnam has shifted quickly between opposing trends.

Along with that is a quick but different policy adjustment between countries and within the same country but between different times, such as the adjustment from the loose monetary policy in 2020, 2021 to tighten with different frequencies and levels in 2022; different countries have different monetary policies. The policy adjustment of major economies has many potential risks and challenges for Vietnam, in the short, medium, and long term.

Domestically, despite being affected by the Covid-19 pandemic, in the two years 2020-2021, Vietnam's economy has been one of the few economies in the world that still has positive growth. The encouraging results of 2021 have positively supported the recovery process in the first months of 2022.

Since the beginning of 2022, international organizations have made many positive comments on economic development in Vietnam.

S&P has upgraded Vietnam's long-term credit rating to BB+ with a "stable" outlook. Vietnam's GDP growth forecast in 2022 has been continuously raised, while the world and many other countries have continuously lowered their growth forecasts. Vietnam is highly rated in the ranking of Good Government, achieving strong growth in the income equality index and investment attraction (up 33 places and 18 places respectively compared to 2021).

Dorsati Madani, a senior economist at the WB, said that Vietnam's economic recovery was on the right track, right in terms of demand, and domestic manufacturing industries were experiencing significant growth. The current challenge of Vietnam is to ensure a balance between economic recovery and inflation control, and to flexibly coordinate fiscal and monetary policies. Vietnam has a lot of room for development, in which the promotion of economic support packages is suitable for digital economy development, sustainable development, and becoming a developed country in the future.

With the domestic recovery only just beginning, the outlook for global demand is weakening, and inflation risks increase. Due to the low starting point, the WB forecasted that Vietnam's GDP would grow around 7.5% in 2022 and 6.7% in 2023, when the growth rate returned to pre-pandemic levels at 6.5 - 7%. Despite high growth, the economy has not yet returned to its full potential in 2022.

According to the WB, average inflation is expected to be around 3.8% in 2022, as domestic demand continues to strengthen, transport costs and imported intermediate inputs are transferred to the final product cost.

Growth is forecast to reach 7%, inflation will be below 4%

In addition to the positive assessments of the results achieved, a number of international organizations have pointed out some limitations of the internal economy such as bad debt of the whole banking industry increased at a high rate; credit structure is potentially risky, especially retail credit and investment in corporate bonds have increased rapidly; the delay in disbursement of public investment for many years has not changed significantly in large projects and important infrastructure; the delay in disbursement affects the mobilization of capital flows, national prestige, and reduces the confidence of investors, donors, and the people, leading to a situation where capital increases beyond the plan, causing waste, loss, and inefficiency.

Economic experts said that the openness of the economy was at a high level when the total import-export turnover was more than 200% of GDP, which also made the economy vulnerable to external fluctuations. Besides, the foreign investment sector is dominating the openness of the economy, meanwhile, the domestic economic sector is inclined to look inward, poorly connected to the foreign investment sector in particular and the global supply chains in general. Investment capital flow into Vietnam is not of high quality, has not attracted high technology, source technology, and technology transfer as expected.

Forecasting the domestic situation in the last months of 2022, Minister of Planning and Investment Nguyen Chi Dung said that the economy was likely to recover faster; production and business activities continued to prosper; capital from the Socio-Economic Recovery and Development Program was disbursed faster and stronger.

However, the risks and challenges of economic recovery are still great, especially the price of petrol and input materials increased, which resonated with the recovery of domestic consumption, creating inflationary pressure and increasing production costs. It is necessary to have more key solutions to timely support and avoid the decline of domestic production, especially agricultural production; which has an effect on many industries, economic fields, and people's lives.

Minister Nguyen Chi Dung said that the executive goal is to maintain macroeconomic stability, control inflation, and ensure major balances, but without weakening growth drivers; strive to achieve the target of average economic growth in the five years of 2021-2025 at about 6.5-7%.

Ensure the major balances set in the period 2021-2025: the average total investment capital of the whole society in five years is about 32-34% of GDP, the rate of mobilization into the State budget is not lower than 16% of GDP, and State budget expenditure averages 3.7% of GDP. Particularly in 2022, economic growth will reach about 7%, inflation will be controlled to below 4%, and credit growth will be about 14%.