The domestic economy has been gradually escaping from a slowdown, with growth bouncing back over the past three months thanks to the government’s efforts to curb the pandemic and remove enterprises’ obstructions,
with a rise in public investment needed as a primer to attract more private funding.
After growing 4.48 per cent in the first quarter of 2021, the Vietnamese economy bounced back to 6.61 per cent in Q2. In the first half of the year, it increased 5.64 per cent against only 1.81 per cent in the same period last year.
“Despite the ongoing pandemic, the economy has grown stronger thanks to the government’s major efforts in curbing the pandemic, and enterprises’ growing confidence in the domestic business and investment climate which is increasingly improved,” said Nguyen Thi Huong, general director of the General Statistics Office (GSO).
However, such a growth rate for the first half of 2021 would also mean that bigger efforts must be made to reach the goal of 6 per cent set by the National Assembly and about 6.5 per cent as set by the government for 2021.
Last week, the Ministry of Planning and Investment (MPI) reported its two economic growth scenarios for the second half of 2021 to the government last week. In the first scenario, in order to hit the growth target of 6 per cent for 2021, the economy must grow 6.2 per cent in the third quarter, and 6.5 per cent in the fourth quarter. In the second scenario, for the economy to increase 6.5 per cent for this year, the economy must climb 7 per cent in the third quarter, and 7.5 per cent in the fourth quarter. To reach these targets, new solutions must be applied to continue lifting enterprises and people out of difficulties.
The GSO reported that after growing 6.29 per cent on-year in Q1, industrial production in the second quarter of 2021 saw positive growth of 11.45 per cent as compared to that of only 1.1 per cent in the same period last year.
In the first half of this year, the rate was 8.91 per cent on-year, in which the growth rate of the manufacturing and processing sector – which creates 80 per cent of industrial growth – climbed 11.42 per cent as compared to that of 5.06 per cent in the corresponding period of 2020.
In a specific case, state-owned Petrovietnam last week reported that its total six-month revenue is estimated to be over VND251.88 trillion ($10.95 billion), up 8 per cent on-year, in which revenue from industrial activities climbed 22 per cent on-year.
PetroVietnam’s industrial gross output in the first half of 2021 is estimated to be VND174.65 trillion ($7.59 billion), up 22 per cent on-year. In which, exploitation of crude oil and natural gas increased 36 per cent; followed by production of refined oil (25 per cent); chemical products (11 per cent); and production and distribution of electricity and gas (8 per cent).
Meanwhile, state-run Electricity of Vietnam (EVN) last week also reported that in the first six months, its total industrial gross output is estimated to be VND182.78 trillion ($7.94 billion), up 8.37 per cent on-year. Electricity produced and purchased is estimated to be 123.49 billion kilowatt-hours, up 7.41 per cent on-year.
EVN’s commercialised electricity in the six months is estimated to total 111.76 billion kWh, an 8.37 per cent on-year rise. In which, electricity for agro-forestry-fishery activities accounted for 3.6 per cent, electricity for industrial and construction activities holds 55.7 per cent, and electricity for households occupies 32 per cent. The rate for hotels is 4.5 per cent.
The group’s revenue from electricity sales in the first half of 2021 is estimated to be over VND207.3 trillion ($9 billion), up 12.44 per cent on-year. It is expected that the total electricity volume of EVN in 2021 will be 271.6 billion kWh, up 9.9 per cent on-year, and 9.2 billion kWh higher than the year’s initial plan.
According to the GSO, in the first six months, the economy’s production and distribution of electricity increased 8.16 per cent as compared to that of only 3.04 per cent on-year in the corresponding period of last year.
In Vietnam, electricity and petrol are vital inputs for production activities, especially manufacturing and processing. Thus an increase in these two items reflects a climb in domestic production.
Also according to the GSO, in the first half of 2021, the economy witnessed just over 67,000 enterprises newly established, registered at VND942.6 trillion ($41 billion) and employing 484,300 new labourers, up 8.1 per cent in the number of businesses, and 34.3 per cent in registered capital.
If another VND1.15 quadrillion ($50 billion) registered by 23,700 operational enterprises was included, the total capital supplemented into the economy in the period was VND2.095 quadrillion ($91 billion). Moreover, 26,100 businesses resumed their operations, up 3.6 per cent on-year.
“These figures show the great efforts and startup spirit of the business community in the context of an increasingly complicated pandemic,” said Huong of the GSO. “In the first half of the year, the total number of enterprises newly established and resuming operations hit 93,200, up 6.9 per cent on-year. The average registered capital of each enterprise reached VND14.1 billion ($613,000), up 24.2 per cent on-year.”
The GSO last week released the results of its recent survey on manufacturing and processing enterprises in the country. Accordingly, 62.8 per cent of respondents said their second-quarter performance improved when compared to the previous three months.
However, the GSO also stated that in the first five months of this year, there were 70,200 businesses halting operations and waiting for disbandment, up 24.9 per cent on-year. Each month saw an average of 11,700 enterprises withdraw from the market.
The government last week enacted a resolution on enacting 12 policies worth over VND26 trillion ($1.13 billion) to support employees and employees hit by COVID-119. This is the second support package after the first, worth VND62 trillion ($2.69 billion), promulgated in April 2020. It is expected that tens of millions of people will benefit from the second package.
“All procedures for the beneficiaries will be simplified,” said Minister of Labour, Invalids, and Social Affairs Dao Ngoc Dung.
Deputy Prime Minister Le Minh Khai last week signed and promulgated the government’s hallmark Resolution No.63/NQ-CP on key tasks and solutions for boosting economic growth, public investment disbursement, and sustainable exports in the remaining months of 2021 and early 2022.
“Economic growth in the first months of this year has failed to reach the set target, with slow disbursement of public investment, the trade balance tending to shift to a deficit, and rising pressure in inflation. Production and business activities in many sectors have been seriously affected, with the life of many people facing difficulties, especially in pandemic-hit areas and labourers at industrial zones affected by outbreaks,” read the resolution.
The resolution orders bigger efforts to accomplish all goals including growth ones set by the NA and the government, push back COVID-19, and complete vaccinations as soon as possible. Notably, the government has also ordered acceleration of public investment as a key solution to spur on economic growth and attract private investments, which remains weak now.
“All efforts must be made to disburse public investment capital at a rate of 95-100 per cent of the plan assigned by the prime minister. The rate must be 60 per cent at the end of the third quarter of the year,” stated the resolution.
The government required ministries, agencies, and localities to solve all impediments for all state-funded projects, such as site clearance, payments, and determination of responsibility of heads of units. The government will establish working groups to boost disbursements in each ministry, agency, and locality to remove related hurdles.
“Drastic efforts must be made to disburse public investment, and this must be considered an important political task for stimulating production and business, consumption, creating jobs, and ensuring social security,” said Prime Minister Pham Minh Chinh. “It will also help attract investment from other sources.”
The Ministry of Planning and Investment (MPI) has sent a document to ministries, agencies, and localities nationwide asking them to report barriers in their activities involving disbursement of state budget capital allocated to them in 2021, and also to propose solutions for boosting such disbursement.
The MPI will collect all proposals and solutions and then make official proposals to the government in public funding disbursement for this year and beyond.
In the first five months of 2021, the public investment disbursement rate is estimated to be VND102 trillion ($4.43 billion), equal to 22.12 per cent of the initial plan assigned by the government, lower than 26 per cent in the same period last year.
In late 2020, the National Assembly passed a plan for boosting public investment for 2021. Accordingly, total capital from state coffers for next year will be VND477.3 trillion ($20.75 billion).
This sum will be earmarked for many projects. For example, VND16 trillion ($695.65 million) will be used for national target programmes, just over VND15 trillion ($653 million) for the project on constructing the North-South Expressway; VND4.66 trillion ($202.6 million) for land compensation and resettlement of Long Thanh International Airport; VND2.8 trillion ($121.74 million) for developing coastal roads; and VND4.7 trillion ($204.34 million) for supporting localities in implementing some key new infrastructure projects.
According to the MPI, this year these new capital sums, in addition to that attracted from private investors, will help to complete construction of the eastern cluster of the North-South Expressway project, the national coastal road, connecting road routes, airports, and seaports.
Vietnam’s economic growth accelerated to 6.61% y/y in 2Q21, extending from an upwardly revised gain of 4.65% y/y in 1Q21.
The high GDP growth rate of 5.64 percent reported for H1, when a number of large cities and provinces were under social distancing, businesses had to close, and people lost their livelihoods, has puzzled many people.