Vietnam Annual Economic Report 2020 unveiled

This year's report, themed “Consolidating the Base for Fiscal Policy”, focuses on the Vietnamese tax system in both regional and global contexts, thereby pointing out opportunities and challenges to the country’s fiscal system in supporting the sustainable development of the economy.

According to experts, the country’s GDP growth for the whole year reached 7.02 % with the annual average inflation being estimated at 2.79%, lower than the set target of 4% while the international trade and investment are growing.

Economists pointed out that the money market, capital market, and exchange rates remain stable and is brough under control with the budget deficit and public debt also showing certain improvements.

However, the aforementioned successes are based on a macroeconomic foundation that is still uncertain and carries many potential risks, they noted.

Specically, economic growth, exports, and employment are increasingly dependent on the FDI sector and a few FDI enterprises while the private business sector has not grown and is still subject to many barriers from the domestic institutional and business environment.

In addition, the monetary policy space is gradually narrowed by increasing inflationary pressures as well as by the exchange rate commitments with the fiscal policy not creating positive changes in the structure of budget revenues.

In particular, the high public debt, budget deficits, and state assets are increasingly declining, meaning that Vietnam is lacking fiscal buffer to cope with external shocks.

Economists recommended that the Government and ministries need to continue to focus on cutting unnecessary business conditions, to improve the business environment and to overcome domestic shortcomings.

The Commission for the Management of State Capital at Enterprises (CMSC) should set the central task of reducing the focal point of management, removing obstacles to promote the equitization of SOEs, said experts, adding that monetary policy needs to adapt promptly to economic fluctuations.

Experts emphasied that the top priority should be given to flexible exchange rate management, to absorb the impact of external shocks while the interest rates should be kept stable to facilitate businesses' access to the capital market.

They also underlined the need to gradually build a fiscal buffer, first through streamlining the state hierarchy and cutting down on recurrent spending.