Head of the Institute for Branding and Competition Strategy, Mr. Vo Tri Thanh, has an optimistic view that the Vietnamese economy has had "many successes". “We have prevented and controlled the epidemic well. This success is indisputable,” he said.

At recent year-end conferences of ministries and government agencies, Prime Minister Nguyen Xuan Phuc repeated two ideas that General Secretary and President Nguyen Phu Trong had said at the Government's year-end meeting: “The year 2020 was more successful than 2019 and the most successful in the past 5 years with special achievements."

“These results have contributed to very important, quite comprehensive achievements, with many outstanding marks in the 12th term, with historical significance in the 35 years of renovation, contributing to our country’s future, potential, position and international prestige."

"These two sentences describe all of our country's success," the Prime Minister said.

“Moreover, the internal resilience of the economy is much better than before. The macro-economy has stabilized, the budget has been strengthened, reserves have increased, banking has stabilized, and interest rates have decreased. These factors have helped people and businesses trust to spend money on investment and business, making the economy resilient during a pandemic,” he said.

Mr. Vo Tri Thanh's comments summarize a long process that the Government has been trying to pursue in order to stabilize the once unstable economy due to the implementation of over-expanding economic policies.

Public debt decreases

The Party and State leaders attend an online conference between the central government and local governments in December 2020. Photo: VGP

On November 18, 2016, General Secretary Nguyen Phu Trong, on behalf of the Politburo, signed to issue Resolution 07 on public debt: “The need for budget spending is constantly increasing, exceeding the ability to balance resources; revenue is not enough for spending, and budget accumulation for development investment is low. State budget balancing is difficult, while overspending is high; public debt and debt repayment obligations have increased rapidly, the pressure of short-term debt payment is large, and the threat of losing safety is not strictly controlled."

After the issuance of Resolution 07, according to the Central Institute for Economic Management (CIEM), during the 2016-2020 period, the National Assembly issued four laws, three resolutions. The government and the Prime Minister issued 106 decrees and decisions related to the state budget and public debt management.

Those legal documents have put great pressure on policy redirection. According to the draft economic report of the 13th Party Congress, the public debt ratio decreased from 63.7% in 2016 to 55% of GDP in 2019 and 56.8% in 2020. Vietnam "kept macroeconomic stability and improved the national credit rating".

According to Finance Minister Dinh Tien Dung, the financial and budget targets in the past five years fulfilled all the goals of revenue - expenditure structure, overspending, public debt... set by Resolution 25 of the National Assembly.

"The financial foundation and potential are getting better, contributing to macroeconomic stability, and to improving Vietnam's position, prestige and credibility in the international arena," he said.

Prime Minister Nguyen Xuan Phuc emphasized at the Ministry of Finance’s year-end meeting that macro balances are stable, inflation is controlled at a low level, major balances and growth quality have improved, and imports and exports hit a record.

“Public debt at the beginning of the term was over 64.5%, and the current rate of 55.8% is a great effort. The finance sector completed its tasks in 2020 and in the past 5 years very well,” he said.

Handling bad debt

In the banking sector, many important guiding documents were issued in the 2016-2020 period, such as Resolution 05 of the Party, Resolution 24 of the National Assembly, and Resolution 27 of the Government, which set many goals.

Among these goals: bring the on-balance-sheet bad debt ratio of the credit institutions system, bad debts sold to the Vietnam Asset Management Company (VAMC) and bad debts that have undergone debt classifying measures, to below 3% (excluding bad debts of weak commercial banks, which are approved by the Government according to specific plans) by 2020. And reduce the average domestic lending interest rate compared to the average of the group of the four most developed ASEAN countries.

The Government and the Prime Minister issued five decrees and two decisions and the State Bank of Vietnam (SBV) presided over the issuance of 38 circulars in the persistent effort to achieve that goal.

Dr. Nguyen Anh Duong from the Central Institute for Economic Management (CIEM) said: "Dealing with the bad debts in credit institutions has been accelerated and implemented in a substantive and efficient way."

According to CIEM, from 2016 to mid-2020, the whole credit institution system handled VND595.2 trillion of bad debt. SBV's statistics in late May 2020 showed that the internal NPL ratio was at 1.86%, higher than the 1.63% at the end of 2019.

The efforts to stabilize the macro-economy was extremely important. The draft economic report for the 13th Party Congress affirmed: “The macro economy is more stable, inflation is controlled at a low level, the major balances of the economy have been significantly improved. Proactively, flexibly, and synchronously implement many policies and solutions to stabilize the macro-economy, control inflation, and promote growth. The average consumer price index decreased from 18.6% in 2011 to a stable level of about 4%/year in the 2016-2020 period."

Dr. Tran Dinh Thien, former director of the Vietnam Institute of Economics, said: “2020 is an extremely special year, but the achievements must be based on the foundation of previous years. Vietnam has done a good job in stabilizing the macro economy and restoring growth. Without the results of the previous years, stability in 2020 is very difficult."

The resilience of the economy

Macroeconomic stability has helped enhance the people's and businesses’ trust to do business, making the economy much more resilient during the Covid-19 year. In 2020, the country had nearly 135,000 newly established enterprises.

According to the Ministry of Planning and Investment, the number of newly established enterprises increased by an average of 11.6% per year in the 2016-2019 period. This was also the period when the number of newly-established firms exceeded 100,000/year, of which 2019 hit a record number of over 138,000 enterprises.

Meanwhile, the World Bank affirmed that the middle class is being formed, currently accounting for 13% of the population and expected to reach 26% by 2026. Thanks to extensive economic integration, Vietnam's economy is heavily affected by the pandemic, but it also shows considerable resistance. Vietnam is one of the few countries with positive growth in the world.

These factors and many other potentialities show the resilience of the Vietnamese people and businesses, especially when they are guided by the right policies. The State ensures the value of the Vietnamese Dong and improves a friendly business environment, so that people and businesses believe in doing business.

This is the foundation for the World Bank to forecast Vietnam's growth at around 6.8% in 2021, while the Asian Development Bank forecasts 6.1%.

Tu Hoang

Stabilizing macro-economic foundations a priority

Stabilizing the macroeconomy and controlling inflation are still the top priority policies in Vietnam’s next period of development.