VEPR forecasts Vietnamese economy growth at below 6 per cent

VIETNAM, May 18 - HÀ NỘI – The Việt Nam Institute for Economics and Policy Research (VEPR) has forecast the Vietnamese economy will expand at 5.6-6 per cent in 2024 on global persistent uncertainties.

Nguyễn Quốc Việt, VEPR’s Deputy Director, said at the policy dialogue held on Friday in Hà Nội, that the Vietnamese economy was recovering, but lacked a firm grounding.

Major growth drivers such as export, foreign direct investment (FDI) and industrial production were increasing, however domestic demand remained weak and businesses continued to face a lot of difficulties.

Low credit growth still clouded the recovery prospect this year, he said. The pressure from foreign exchange rates weighed on inflation, while skyrocketing domestic gold prices and widening differences with the world prices also raised questions for policy makers.

VEPR’s report on Việt Nam’s economic prospects for 2024 points out that the economy has recovered in the first quarter, with the main drivers, including production and export, showing positive signs. However, the trend is not really steady and there are persistent uncertainties ahead.

The Vietnamese economy might grow at the lower end of the Government’s target, at 6 per cent. However, in the worst case scenario GDP growth rate might reach only 5.5 per cent as per the forecast of the World Bank, Việt said.

According to VEPR’s report, Việt Nam is encountering challenges from the US Federal Reserve rate-cut delay which weighs on exports and reduces foreign investment.

Complicated and prolonged geopolitical tensions in the world also impact Việt Nam’s import and export markets and productivity.

Production and business are still struggling in terms of the market, human resources, technology and capital, the report points out. Other challenges include high inflationary pressure, climate change, drought, flood and saltwater intrusion.

Việt Nam is successfully maintaining macroeconomic stability. However, due to limited fiscal resources after many years of budget deficits, along with monetary policies tied to inflation and exchange rate targets, Việt Nam cannot pursue macro policies in the same way as other countries around the world, the report says.

Việt said to accelerate growth, Việt Nam should focus on speeding up spending on public investments, especially on key infrastructure projects.

In addition, it was necessary to prioritise policies to remove difficulties for enterprises and consolidate business confidence. In the long term, improving productivity, competitiveness of each industry, each enterprise and the entire economy would be critical to improve growth quality.

He also suggested that the reduction of value added tax (VAT) should be extended to the end of the year.

Another important solution was to speed up credit growth in line with ensuring the financial system safety, coupled with diversifying capital raising channels for enterprises besides banking credit.

The focus should also be on completing the national digital transformation strategy and promoting elements that create added value to the digital economy, he said.

Hoàng Văn Cường, a member of the National Assembly’s Finance and Budget Committee, said that weak domestic demand was a real problem. Private investment was alarmingly low and enterprises were in a lot of trouble, struggling to access credit.

The priority should be on ensuring the macroeconomic stability which can be within reach this year, Cường said.

According to Nguyễn Đức Hùng Linh, the founder of Think Future Consultancy, fiscal and monetary policies are needed to stimulate demand.

Towards a stable gold market

At the discussion session on developing gold market sustainably in an uncertain world, Cường said that the domestic gold market was disconnected from the global market due to the monopoly on import and export, of the SJC-banded gold bars.

In the context of low interest rates, gold became an attractive investment while the supply was limited, pushing up prices, he said.

The move by the State Bank of Việt Nam to auction gold in a bid to increase supply did work to cool down the domestic prices, however from another angle, the auction was pushing gold prices higher, Cường said.

He added that taking domestic price as reference price for auctions was not appropriate, making it difficult to pull the prices down to a target level. Instead, world gold prices plus taxes and relevant costs should be taken as a reference price.

Nguyễn Minh Tuấn, general director of AFA Capital, said that it was important to decide whether gold is a normal product, or not for appropriate management policies.

To promote the development of the gold market in the long term, the Decree No 24 on managing the gold business dated from 2012 needed to be amended to remove the SJC monopoly on gold bars and gold imports.

There should be flexible taxes to manage gold import flexibly in each period, he said.

The foundation of a gold depository exchange should also be considered, together with allowing gold trading via accounts to create convenience for both sellers and buyers and improve market transparency. — VNS