With successful anti-epidemic measures, economic activities will return

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Many businesses said that they could not "stand" for a long time if the COVID-19 epidemic continued. Photo: H. Diu.

Find measures to reduce damage

In announcing the conclusion of Prime Minister Nguyen Xuan Phuc at the Government's Standing Committee on COVID-19 prevention and control, the Prime Minister requested the State Bank of Vietnam, the Ministry of Finance,the Ministry of Industry and Trade, Ministry of Agriculture and Rural Development, and the Ministry of Transport to urgently propose and submit to the Prime Minister packages of support policies on credit, tax, export and expanding domestic market, including prescribed solutions must be reported to the Standing Committee of the National Assembly if it is deemed necessary.

Thisshows that the Prime Minister's direction is very timely and right in the situation of the COVID-19epidemic and risk of spreading globally. Domestic and international experts said that the COVID-19 epidemic could cause global economic losses of up to USD 160 billion. The statistical report on the socio-economic situation in February and the first two months of 2020 bythe General Statistics Office (Ministry of Planning and Investment) also showed that many important indicators of Vietnam's economy were poor.

Accordingly, in the first two months of 2020, the index of industrial production of the whole industry only increased by 6.2 percent over the same period last year, much lower than the increase of 13.7 percent in the same period in 2018 and 9.2 percent of the same period in 2019. The revenue of accommodation and catering services in the first two months of the year was estimated at VND 95 trillion, an increase of only 1.7 percent compared to the increase of 10.8 percent of the same period last year.

Especially, businesses are currently facing many difficulties in both input and output, which may have to suspend production. Leaders of many commercial banks said that the outstanding loans of businesses affected by the COVID-19 epidemic could reach hundreds of billionVND, accounting for 10-15 percent of the total outstanding loans, if they do not pay debts on time, this volume will become bad debts, affecting the whole banking industry.

In this situation, many countries in the world have come up with solutions and stimulus packages to "save" the economy. For example, in China, in early February, the People's Bank of China (PBOC) had "injected" 1,700 billion yuan (approximately US$243 billion) into the financial market. PBOC also continued to lower 0.1 percent short-term lending interest rates and most recently medium-term lending rates to help businesses minimize losses from the disease.

In Vietnam, although there has not been an official move to reduce interest rates or inject capital into the economy from the State Bank, the State Bank has issued a document instructing commercial banks to have policies to support the settlement, recovering damage caused by the COVID-19 epidemic, such as rescheduling loan repayments, considering loan interest exemptions, etc. Therefore, a series of commercial banks have offered credit packages worthtrillions of dong. The loan interest rate is from 1-3 percent to individual customers and businesses that suffer from the disease.

There are not enough bases to propose an economic stimulus package

The above solutions are considered timely and effective to support businesses and the economy. Assoc.Prof.Dr. Hoang Van Cuong, Member of the Finance and Budget Committee of the XIV National Assembly, Vice Rector of the National Economics University said that low-cost loan support packages will help businesses mobilize capital investment in production and business. In the current context, if pumping a large amount of money into the economy, it will only create a recovery in the short term, it is difficult to bring long-term effects, even if this money is put into the sensitive areas may cause adverse effects.

Sharing the same view, economist Do Thien Anh Tuan, School of Public Policy and Management Fulbright, said that the current context is very different from the period of economic recession over 10 years ago. The economic stimulus package alone does not solve the problem. Vietnam's economy is not short of money. Currency and space gaps for fiscal growth this year are still very large. The same goes for fiscal policy. The tax reduction may help increase the disposable income of the people, but the people do not have to reduce their consumption temporarily for falling income.Because of fear of disease, they need to reduce their travel and spending needs in the short term.

From the above comments, experts said that the State should prioritize resources for the health sector to fight epidemics. The solutions for the economy need to be calculated in the long run, based on the results of assessing the specific impacts on each branch and field. Therefore, many experts also recommend not expanding monetary policies to stimulate the economy in this period, as this can cause inflation to rise, whileVNDdepreciation leads to a series macro balances which are affected. According to Mr. Vu Tien Loc, Chairman of Vietnam Chamber of Commerce and Industry (VCCI), the short-term urgent measure is to support production and business, trying to reduce costs for businesses. In the long term, there must be a solution to diversify the international market, increase competitiveness for businesses and the economy.

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Talking more about this issue, Mr. Do Thien Anh Tuan said the Ministry of Finance should urgently propose and implement measures to support those affected by the epidemic such as exemption, reduction and extension of tax for people and businesses. In addition, the Government may increase buying to support industries and sectors affected by the disease if it is a commodity that the Government can increase to buy reserves. “In general, up to now, there have not been enough bases to make so-called economic stimulus packages. Not only businesses that lack money, but people are afraid of the risk of disease. If the epidemic prevention measures aresuccessful, economic activities will return,”Mr. Do Thien Anh Tuan said.