Unprecedented times call for new consensus to overcome challenges

The current challenges require an unprecedented consensus to overcome it, said former Director of the Central Institute for Economic Management Nguyen Dinh Cung.

From real life

Giang A Mia, a H'Mong ethnic man, arrived at a checkpoint in Thanh Hai commune, Thanh Liem district, Ha Nam province on the evening of October 8. It took him four days to pass more than 1,500km from the southern province of Binh Duong on his motorbike to Ha Nam.

Giang A Mia returned to his hometown in the northern mountainous province of Ha Giang with an unpromising prospect. “I will probably go to the fields and forests again. There's nothing else to do," he said, adding that the income from the job is far from 100,000 VND/month, which is not enough to buy 5kg of rice.

Chairman of Thanh Hai Commune Tran Van Tham, who has been on duty for several months at this checkpoint, said that this checkpoint had welcomed more than 8,000 migrant workers who were on their way home from the south.

"Up to 95% of the people who pass this checkpoint are ethnic minorities in the northern provinces," he said.

Since Ho Chi Minh City and some neighboring provinces lifted lockdown in early October, after more than five months implementing social distancing under Directive 16, migrant workers have left the city and these provinces for their hometowns, including northern mountainous provinces.

It is estimated that about 1.3 million people left the city in the first half of October.

Pham Hoai Nam, Director of the Department of Population and Labor Statistics, General Statistics Office, said that as of September 15, about 1.3 million workers had left industrial centers in Ho Chi Minh City and neighboring provinces to return home.

In the third quarter of 2021, 23 provinces imposed a lockdown to fight the epidemic. Up to 4.7 million people lost their jobs, of which 1.7 million people were unemployed, an increase of 532,200 people compared to the previous quarter.

The income of workers in Ho Chi Minh City decreased by more than half, to over 4 million VND/month from more than 9 million VND, the deepest decrease recorded in the whole country.

"The reason is that Ho Chi Minh City’s social distancing lasted too long, causing the high unemployment rate in the formal sector," an official from the General Statistics Office explained.

In the report on labor and employment in the third quarter and the first nine months of 2021, the national statistics agency used descriptive words instead of the usual neutral words: The situation of labor and employment was “worse”; unemployment and underemployment rates rose to “the highest ever”; the average monthly income of workers decreased "seriously"…

To the National Assembly session

Cần đồng thuận chưa từng có để vượt qua thách thức

Reporting to the National Assembly, Prime Minister Pham Minh Chinh said that as of October 15, the Government had provided support worth nearly 22 trillion VND for more than 24 million people and lent 566 billion VND to pay salaries for over 161,000 people.

In addition, the Government had provided more than 137,000 tons of rice to more than 2.4 million households with over 9.1 million people in 31 provinces and centrally-run cities affected by Covid-19.

Those support packages for people as well as other financial and monetary support packages for businesses were timely but likely far from their minimum needs.

For example, the Government's report said that, according to initial statistics, tens of millions of people need support at the same time; a total of about 7.5 million people in HCM City received support in three phases.

The fate of Giang A Mía and millions of other unemployed people is just a part of the socio-economic picture of the country that has experienced unprecedented difficulties, caused by the epidemic, which caused GDP growth in the third quarter to be -6.17 % - the lowest in statistical history in the country.

However, it is more worrying, said former director of the Central Institute for Economic Management Nguyen Dinh Cung, that the driving force for growth is declining. For example, retail sales growth declined sharply; the index of processing - manufacturing industry decreased deeply; public investment declined, while private investment increased slowly; the southern dynamic region weakened; and the GDP growth rate of the South was lower than in the North.

 

Thus, with GDP estimated at 3% this year and 2.91% in 2020, the GDP growth rate for two consecutive years has fallen sharply compared to the average and the deepest drop in the three periods of crisis since Doi Moi (renovation) started in 1986.

Cung said: "So what is the feasible task to achieve the target of 6% GDP growth in the period 2021-2025?”

Credit guarantee fund is needed

Former director of the Vietnam Institute of Economics Tran Dinh Thien said the strength of enterprises is now much weaker than a year ago.

"To help Vietnamese businesses recover, the Government’s strong support is necessary, which must be quick, timely and last long enough," he said.

He said liquidity or the ability to access new capital of Vietnamese enterprises is and will be the most critical issue for economic recovery. At this time, the cash flow of many businesses has dried up, and they cannot meet the conditions to take out bank loans.

“I think it is necessary to establish a Credit Guarantee Fund as soon as possible. That is, the State provides guarantee for businesses to borrow from banks. This is a measure to save the economy,” he said.

This suggestion will be necessary when the Ministry of Planning and Investment drafts the program for socio-economic recovery and development.

Creating momentum

During a meeting on the draft on October 24, Prime Minister Pham Minh Chinh said that the scope of this program must be wide enough and the time of implementation must be long enough. The program also has to closely follow the resolution of the 13th National Party Congress, the 5-year socio-economic development plan (2021-2025) and the socio-economic development program in 2022.

Nguyen Dinh Cung said that the country's resources are now available, such as foreign exchange reserves up to 100 billion USD, and international financial institutions have committed to provide multi-billion USD loans to stimulate the economy.

In a meeting with Minister of Planning and Investment Nguyen Chi Dung, Cung suggested that the budget deficit should be accepted at a high enough level, 8-10% of GDP, even higher, to cope with the current economic situation and create motivation for the coming years. That figure is about $30 billion, 3.7 times higher than the $8 billion stimulus package in 2009.

“The current challenge is unprecedented, requiring an unprecedented consensus to overcome it,” he said.

Cung does not personally know worker Giang A Mía, but he is familiar with similar scenarios of many others during the pandemic.

“Millions of people are unemployed; millions of people have lost their jobs. If we don't spend money now to stimulate demands, then when?” he said.

Tu Giang - Lan Anh

Economist warns of side effects from bailouts

Economist warns of side effects from bailouts

Vietnam is considering an unprecedented support package, including tax reductions, interest rate subsidies and cash to people. However, the package needs to be tailored to the economy’s size or it will cause “side effects”, an expert has said.

Which bailout package for the economy will be passed?

Which bailout package for the economy will be passed?

Minister of Planning and Investment Nguyen Chi Dung has been assigned a difficult task – drafting a program on recovering and developing the economy in association with improving economic autonomy in 2022-2023.

 
 

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