In 2021, Vietnam’s economy for the first time faced serious impact from the global crisis in terms of health, economy and society. The fourth pandemic wave had a great impact on all aspects of life, not only threatening people’s health, but also causing stagnation of operation in industrial zones (IZs), disruption of production chain and purchasing power decrease. 

Workers in IZs, freelancers and workers in the service, tourism, and transportation sectors have been seriously affected. The targeted GDP growth rate in 2021 and some macroeconomic indexes were unattainable.

Compared with the report submitted at the second session of the 15th National Assembly, the supplement report shows some active changes: the CPI of the 2021 increased only by 1.84 percent, the lowest level since 2016 (the figure reported to the National Assembly was below 4 percent).

The state budget collection was estimated at VND1.56 quadrillion, an increase of VND202.9 trillion compared with the figure reported to the National Assembly. The state budget overexpenditure was VND286.5 trillion, or 3.41 percent of GDP (figures reported to the National Assembly before were VND343.67 trillion and 4 percent of GDP, respectively).

However, the report pointed out that five out of 12 socio-economic targets were unattainable. The restoration of disrupted production and supply chains has made some positive changes, but progress is going slowly. The finance, real estate and securities markets were hot at some moments.

The bad debt ratio has been curbed at below 2 percent, but the figure may increase in the context of the Covid-19 pandemic and the uncertainties of the political and economic situation in the world.

The balance sheet bad debt ratio of credit institutions was 1.49 percent as of December 31, 2021. The balance sheet bad debt ratio and the debts sold to the Vietnam Asset Management Company (VAMC) which have not been settled and may become bad debts are 2.88 percent. 

However, if counting all the outstanding loans which have bee  restructured and have had payment deadlined extended in accordance with Circular 01/2020 which are at risk of becoming bad debts, the figure would be 6.31 percent.

Production and business are facing difficulties, especially the services such as tourism, accommodation, food and passenger transport. Some production and supply chains have been disrupted and goods circulation are stuck sometimes. The resilience of the economy has become weaker and many enterprises have had to suspend the operation and bevome dissolved.

“Though the socio-economic situation in Q4 2021 showed signs of improvement, the consequences of the pandemic are very serious and the demand of the economy cannot recover within a short time,” the report reads. “This explains why it’s necessary to quickly and effectively implement the socio-economic recovery and development plan, so as to bring the economy back to normal like in the pre-pandemic period.”

Big challenges in 2022

The high prices of petroleum products, essential goods and services, the risks of production and supply chain disruption from China and the heavy fluctuation of the stock market all are risks that may affect economic recovery and macroeconomic stabilization.

The oil price increase since late February has had big knock-on effects on transport fees, production and logistics costs, and the prices of goods and input materials. 

The CPI in April increased by 2.09 percent over the end of 2021, which was nearly twice as high as the end of 2018-2021, thus putting pressure on efforts to stabilize the macroeconomy and control inflation, and reduce the effects of policies supporting people and businesses to overcome difficulties.

The crude oil price escalation is believed to cause negative impact on many macroeconomic targets in 2022 and 2023. Therefore, it’s necessary to flexibly control domestic petroleum prices as well as ensure supply.

The Government, in its report, also mentioned pressure on the dong/dollar exchange rate as a result of the high inflation in the US. FED has raised the prime interest rates, while the Russia-Ukraine military conflict lasts a long time and the input material prices have increased sharply.

The risk of bad debts and the problems of the finance and capital market are issues that need to be closely watched over so as to give timely actions. The stock market and corporate bond markets had sessions with strong corrections in April. Some share price manipulation cases have had negative impact on the market. 

Luong Bang