This is in an effort to minimize the possible economic impacts on Vietnam’s economy.

MPI believes that if the US defaults on its debt, this will impact Vietnam’s economy in three channels – export, stock market and forex market.

MPI reported that the US is the world’s largest public debt market with the debt hitting the ceiling of $31.4 trillion in January 2023. The US accounts for one third of the global bonds, and the US Treasury Bills are considered the leading risk-free asset which brings guaranteed returns to investors, big and small, and the governments of many countries. It is also the benchmark to assess other financial tools.

The US is now facing the risk of having to declare a debt default, if the ceiling for public debt is not lifted by early June 2023. If the US declares default, the consequences will be extremely serious which will have a big impact on the entire world economy.

The first and the most direct impact is that investors will lose confidence in the dollar, which will weaken the economy. A default will drive the US economy to recession.

Moody’s Analytics estimates that right after that, the US economy would see a one percent decline, while the unemployment rate would rise from 3.4 percent to 5 percent, and 1.5 million workers would lose their jobs.

As for Vietnam, MPI believes that the default, if it occurs, will have an impact on three channels – export, stock market, and monetary and forex market.

The ministry said that Vietnam needs to prepare for the scenario with some solutions as follows: firmly and flexibly the tools of the monetary policies, ensuring liquidity and safety of the banking system; getting ready to make interventions to handle the pressure on interest rates, exchange rates; ensuring the stable and smooth operation of the monetary and forex markets.

In addition, the ministry asked to use necessary media solutions to consolidate and stabilize financial and securities investors’ feelings; continue to diversify production activities and export markets to ease the reliance on a few markets. 

It is also necessary to continue to drastically, synchronously and effectively implement the solutions to support and remove difficulties and obstacles for people and businesses so as to restore investment in production and business; expand the domestic consumer market, increase the resilience of the economy; accelerate the implementation of the socio-economic recovery and development program, with the focus on speeding up the disbursement of public investment. 

The ministry suggests designing an open program on socio-economic recovery and development for the period from now to 2025.

However, MPI has updated the information that the parties in the US had reached an agreement on raising the public debt ceiling, averting the default.

Luong Bang