Unlock growth drivers for economic recovery

Commodity exports are the bright spot of the economy in the first eight months of the year and the driving force for the economy in 2020. Photo: Internet

Efforts to regain growth momentum

The Covid-19 pandemic has seriously affected almost all economic and social sectors, especially the aviation, tourism, accommodation and catering services industries. Many businesses have gone bankrupt, dissolves, suspended their operations, and narrowed their scale, while income and employment are severely affected, unemployment and underemployment increase rapidly. According to many experts, the successful control of the Covid-19 pandemic and the positive results in economic development in the first eight months of the year created a basis for economic recovery in the last four months of 2020 and regaining stronger growth momentum in 2021.

Accordingly, a stable macro economy will be maintained; inflation will be controlled; the consumer price index gradually will decrease; interest rates will decrease; and exchange rates and the foreign exchange market will be stable. The average CPI in the eight months of 2020 increased 3.96% over the same period last year, initially controlled at less than 4% compared to the target set by the National Assembly. Money and credit markets are stable. Disbursement of public investment is promoted.

“Vietnam's finance is good and able to overcome the impact of the pandemic, ranking 12 out of 66 emerging economies with a healthy financial background. According to some big financial institutions, if Vietnam does well, the economy can grow 2-3% in 2020,” said Minister, Chairman of Government Office Mai Tien Dung.

Along with accelerating the disbursement of public investment capital, solutions to attract FDI inflows after the Covid-19 pandemic were also urgently deployed. Accordingly, in addition to urging the review of clean land fund, preparation of infrastructure, human resources, and special preferential policies to attract FDI, recently, in the context of the Covid-19 pandemic, many online conferences on FDI attraction have been held. For example, the Vietnam - Japan online investment promotion conference held at the end of July 2020 attracted more than 1,000 Japanese enterprises; and the Vietnam - Singapore Online Investment Promotion Conference held last week also attracted 500 Singaporean enterprises.

To regain growth and economic recovery in the last four months of the year and 2021, according to the Minister of Planning and Investment, there should be strong and drastic mechanisms and policy solutions to create resilience for the whole economy, stimulating all three main growth drivers, including investment, export and consumption, to achieve the highest level of the targets of the 2020 socio-economic development plan. Thus, investment, exports and consumption will be the "tripod" – the main driving forces of the 2020 economy.

Strongly focusing on promoting business production, domestic consumption, exports and promoting disbursement of public investment capital to achieve recovery and socio-economic development in a new normal state are orders from the Prime Minister to direct the tasks and solutions for economic development from now to the end of the year.

Economist Nguyen Tri Hieu said: “The world economy this year is forecasted to decline by 4-5%, while the Vietnamese economy is forecasted to have a positive growth rate of about 2%, which is shown on our export index.”

Import and export of goods continued to be the bright spot of the economy in the eight months, of which exports reached over US$174 billion, up 1.6%. In particular, the export of the domestic sector reached nearly US$61 billion, up 15.3%, while Vietnam's economy had a large trade surplus.

An expert from the National center for Socio-Economic Information and Forecast stated that remarkably, the export of the domestic business sector had increased faster than the export growth rate of the FDI sector, which showed that domestic firms have taken advantage of opportunities amid the pandemic.

The Covid-19 pandemic not only has a negative impact but also has a positive impact, at least for the products that are consistent with the export orientation of domestic firms. Experts said that it was necessary to facilitate exporting enterprises to maintain and expand markets, and their advantageous products in export can access foreign markets, avoid reducing market share and losing export markets, especially for key export products.

Promote disbursement of investment capital for key projects

Regarding investment, public investment has been the main driver of economic growth in 2020. To unlock this important resource, the Prime Minister has requested to drastically remove difficulties and problems, strongly promote disbursement of public investment, especially ODA capital, creating a driving force for economic growth and jobs for workers.

Accordingly, the Prime Minister has requested to focus on public investment disbursement in key projects, of which site clearance has a decisive factor to the implementation and disbursement schedule. The Prime Minister asked to speed up the implementation of site clearance for major projects such as: The Eastern North - South Expressway Project, Long Thanh International Airport Project, the La Son - Tuy Loan section of the Ho Chi Minh Highway, My Thuan - Can Tho Expressway, Ben Luc - Long Thanh Expressway, urban railway projects, and other urgent projects.

According to the Ministry of Planning and Investment, by the end of August 2020, nearly 50% of the public investment capital in 2020 has been disbursed.

Along with maintaining and expanding export markets, strongly promoting consumption, of which, paying special attention to the domestic market with nearly 100 million people is an important solution creating a driving force for socio-economic development.

Assoc. Prof. Dr. Nguyen Khac Quoc Bao, Dean of the Faculty of Finance (University of Economics Ho Chi Minh City), said that stimulating domestic consumption was expected to support public investment to keep demand stable to a certain extent, ensuring to maintain economic activities and prevent the possibility of a recession. However, people tend to rearrange their expenses, save more to deal with bad scenarios that may happen in the future.

The psychology of risk prevention is the most difficult barrier of stimulus measures.

“To create a really effective stimulus policy, it is necessary to have a solution to erase the pessimism that is freezing consumers’ confidence. We are about to enter the fourth quarter with many big purchases, which is an opportunity for the stimulus policies to take full effect. If people believe the situation will get better, the pandemic is controlled, the Government will have policies to ensure employment, income, and economic stability, they will restore their needs. Meanwhile, production in particular and the economy in general will be revived,” said Bao.