Identifying barriers to economic growth in 2022

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In 2022 and 2023, the economy will once again demonstrate its resilience and dynamism. Photo: Le Huong

Influential factors

At the opening session of the 2nd session, the XV National Assembly, the Government set a target that the growth rate of gross domestic product (GDP) in 2022 will reach about 6 - 6.5%. According to experts, this is a rather difficult target for Vietnam's economy in 2022, because the growth figure of 6-6.5% is very high amid the pandemic and strong impacts on the economy.

Analyzing more closely the barriers that may affect economic growth in 2022, Dr. Nguyen Duc Thanh, Director of the Vietnam Center for Economic and Strategic Studies (VESS), said that a repeat outbreak in 2021 has caused the economy to stall, disrupt supply chains, and disrupt markets. The labor market and domestic enterprises were very badly hurt.

Along with that, geopolitical and world economic developments may increase risks to input factors of enterprises such as raw material prices. This will affect when opening up the economy, creating a delay for the economic recovery in the near future.

According to Dr. Pham The Anh, a macroeconomic expert, Head of the Department of Macroeconomics, National Economics University, recently, due to the impact of the pandemic, demand was weak, goods could not be circulated, inflation risk is still relatively large. Therefore, sooner or later, production costs will also be reflected in the output prices of products, from gasoline, logistics, disease prevention costs.

“When social activities resume, consumer demand increases, those factors will affect prices and put pressure on inflation. It is forecast that food prices at the end of the year will likely increase again, due to difficulties in supply such as re-herding, rainstorms, etc. while demand will increase at the end of the year," said Mr. The Anh.

Agreeing with Dr. Pham The Anh, Assoc. Prof. Dr. Bui Tat Thang, former director of the Institute of Development Strategy (Ministry of Planning and Investment), said that the disruption of supply chains and the flow of resources is not easy to overcome in the immediate future. This inevitably leads investors and policy makers to rethink the way economic activities are organized in the near future. In addition, the risk of a supply shortage of many global commodity products (food-food, energy, raw materials) will also lead to an increase in prices of some strategic commodities.

Don't miss economic recovery

With the above difficulties and risks, it can be seen that the economic growth prospects greatly depend on the speed and scale of vaccination as well as the effectiveness of disease prevention measures; effectiveness of support packages, promoting growth. Regarding monetary policy, Dr. Vo Tri Thanh, former deputy director of the Central Institute for Economic Management (CIEM), said that besides extending, postponing and freezing debt, it is necessary to reduce interest rates on existing loans to remove cash flow difficulties.

In addition, the State Bank needs to stabilize the overall liquidity of the system, use the credit ceiling to encourage commercial banks to boost lending.

“In terms of fiscal policy, it is necessary to expand the scope of support to include people and business households. Besides extending and reducing some taxes and fees, it is necessary to choose industries that are seriously affected by Covid-19 such as aviation, industries that spread the economy to calculate timely support solutions," Dr. Vo Tri Thanh said.

According to Dorsati Madani, the senior economist at the World Bank, in 2022 and 2023, the economy will once again show its resilience and dynamism. When the crisis is under control, the economy will recover and grow again, and return to the previous growth trend at about 6.5%. But the Government can still implement policies to mitigate those risks.

The World Bank forecasts that from 2022, Vietnam's economy will recover to the pre-Covid-19 level at 6.5-7%. Monetary policy is expected to remain through the implementation of a number of tools, which allow enterprises to extend the repayment period. Fiscal policy will be more supportive by accelerating the implementation of public investment projects, especially after the lifting of travel restrictions. The WB is also interested that after the second social security support package, the Government is ready to deploy a tax support package for businesses.

The World Bank recommends that, with the existing fiscal space, Vietnam needs to continue deploying resources to minimize adverse social impacts and prevent negative risks to growth. In the future, Vietnam needs to pursue green growth and digitalization to improve the resilience and sustainability of the economy.