The government has launched a series of monetary and fiscal solution packages to stimulate the economy after Covid-19. Do you think these policies will bring the desired effects?

Controlling inflation and stabilizing the macroeconomy are prerequisites that must not be exchanged to maintain the society’s confidence. However, inflation control and macroeconomic stabilization are facing difficulties and challenges.

The push costs are strong, which will cause production costs to increase, thus pushing up goods prices and the consumer price index (CPI). Besides, the increase in capital mobilization and lending interest rates will also lead to higher production costs. The US dollar is appreciating, putting pressure on the dong/dollar exchange rate, and import costs are increasing.

International institutions have predicted that the inflation rate in Vietnam will rise from 4 percent this year to 4.5 percent next year.

I can say that monetary policy cannot be loosened. It should stay the same or should be tightened so as to control inflation. As such, there is no space for monetary policy and it cannot be used to stimulate growth.

So, will the fiscal policy and support packages be able to offset monetary policy in promoting growth?

We created an economic stimulus package worth VND238 trillion for two years, 2022-2023. The package includes remission of tax, land rent, fees and charges (VND63.8 trillion); extension of tax and land rent payment deadlines (VND6 trillion); increase in spending on investment and development (VND127.85 trillion); and interest rate subsidies for businesses, cooperatives and business households (VND40 trillion).

After nine months of implementation, only 20 percent has been disbursed. The problem is that even if all the money is disbursed, these tax and fee remissions won’t be able to offset increased input costs of enterprises. Meanwhile, collections to the state budget from enterprises are on the rise, especially land-use fees, taxes and social insurance premium arrears. 

As such, fiscal policy will not help much.

From the perspective of enterprises, we can see that they are facing challenges. Production costs have increased more sharply than the CPI. They have seen profits decrease and have incurred losses, so they had to scale down production.

Monetary policy tightening leads to an increase in capital costs. This, plus restrictions in credit access, makes it impossible for enterprises to expand business plans. The product price increases, lower personal incomes, and lower consumption levels will lead to a reduction in revenue and profits.

Export and foreign direct investment (FDI) capital are still considered pillars that stimulate growth. What do you think about the pillars in the context of a global recession?

We have facilitated trade and exploited the opportunities to access export markets on the basis of 15 free trade agreements (FTAs) which have taken effect. Exports will still be a driving force for economic growth. However, some factors that may hinder the development of exports have appeared.

The growth of the world economy in general and of large trade partners of Vietnam in particular has fallen sharply for 2022-2023. They have reduced the need to import products.

The geopolitical competition between China and the US is becoming more intense. Meanwhile, both the US and China are indispensable markets for Vietnam. The space for balancing relations with the two partners may be narrowed. Meanwhile, the Russia-Ukraine military conflict is escalating and there will be unpredictable uncertainties.

FDI capital flow to Vietnam has decreased, thereby leading to a reduction in growth of manufacturing industry and exports, which will erode the most important two-decade driving force for economic growth.

In 2020, registered FDI capital was $28.5 billion, down by 25 percent from 2019. FDI in 2020 was $20 billion, down by 2 percent.

In 2021, registered FDI capital was $31.15 billion, up by 9.2 percent over 2020, but implemented FDI was $19.74 billion, down by 1.2 percent.

In the first nine months of the year, registered FDI was $18.75 billion, down by 15.3 percent.

I have to warn that the strengths of Vietnam – exports and FDI attraction – are weakening because of unfavorable conditions outside and inside because Vietnam’s competitive edge is declining.

Are you exaggerating the difficulties, even if economic growth has been at a record-high in the last decade?

Fiscal and monetary policies are being used with the focus on stabilizing macroeconomic and fighting inflation, so they won’t help foster growth.

Macroeconomic factors tend to have negative influences on investment, production, business, and consumption.

International institutions have predicted high growth rates for 2022, but lower growth rates for 2023.

So, what are the driving forces for growth, then?

Institutional and business environment reform is the only factor to stimulate growth for now. Therefore, stepping up reform and removing barriers for businesses to join the market are more necessary and urgent than ever.

Tu Giang