This week Prime Minister Nguyen Xuan Phuc is expected to promulgate a hallmark resolution on tasks and solutions for removing difficulties for production and business, and to reboot the economy. The draft resolution, compiled by the Ministry of Planning and Investment (MPI), stated that in order to ensure the state budget balances, the government will, amongt many measures, order ministries, agencies, and localities to truncate 30% of costs for domestic meetings and business trips, and 50% of costs for overseas business trips.
“All revenues and expenditures from the state budget must be stringently controlled, while recurrent spending must be limited, with no money used for non-urgent activities,” PM Phuc stressed. “Ways must be found to mobilise all financial resources in society in order to support labourers, production, and businesses.”
The government’s sturdy move comes after estimations show a grim picture in the state coffers this year, quite the contrary to last year’s.
The National Assembly (NA) last November adopted a resolution on state budget for 2020, with total state budget revenue of over VND1.51 quadrillion (US$65.65 billion), and total state budget expenditure of nearly VND1.75 quadrillion (US$76 billion).
Total budget deficit will be VND234.8 trillion (US$10.35 billion), tantamount to 3.44% of GDP, of which the central budget deficit will be VND217.8 trillion (US$9.47 billion) or 3.2% of GDP, and the local budget deficit will be VND17 trillion (US$880 million) or 0.24% of GDP.
However, it may be quite difficult to realise this plan.
The Ministry of Finance (MoF) last week reported that in 2020, it is estimated that the state budget will lose VND130-150 trillion (US$5.65-6.52 billion) as compared to the initial plan, due to very poor performance of enterprises and a rise in government spending to overcome the consequences of COVID-19.
This figure is estimated based on MPI forecasting that the economy may grow 5.3% this year, and global crude oil for the whole year will hover at US$30-35 per barrel, while the government will implement solutions on fee and tax exemption and reduction for enterprises, and no money will be collected from the equitisation and divestment of state-owned enterprises.
If the pandemic lasts longer and the economy grows less than 5% or even below 3% as predicted by some international organisations, the state budget revenues will be far lower.
The MPI last week reported that in the first four months of this year, state budget revenue was estimated to be VND491.4 trillion (US$21.36 billion), down 6% year on-year.
“This is due to many enterprises narrowing down their production and business, causing a decline in their contributions to the state budget,” said MPI Minister Nguyen Chi Dung.
An enterprise survey conducted in March by the National Advisory Council for Administrative Reform found 74% of surveyed firms expected to shut down operations temporarily if COVID-19 was not controlled by June 2020.
The economy’s four-month index for industrial production rose only 1.8% on-year, with the mining sector decreasing 6.8% on-year, the MPI reported.
In a specific case, the average price of crude oil for April fell by US$20 per barrel or 33% against February, in the first three months falling by 6% against the initial plan of US$60 per barrel, and 14% against the same period last year.
PetroVietnam stated that such grave impacts have led to its total March and first-quarter revenue of VND49 trillion (US$2.1 billion) and VND165 trillion (US$7.1 billion), equivalent to 80.8 and 90.9% of initial projections, respectively.
“The group’s contribution to the state budget in March and the first three months of the year was VND6.5 trillion (US$282.6 million) and VND20.8 trillion (US$904.3 million), tantamount to 90.6 and 89.7% of the initial plans, respectively,” PetroVietnam said in a statement.
Reductions in global oil price will likely lead to a decrease in Vietnam’s crude oil exports, causing a dent of VND7-17 trillion (US$304.3 million-739.1 million) to the country’s state budget revenue in 2020, said the MoF.
According to the MPI, in the first four months, state budget spending was estimated to be VND472.1 trillion (US$20.5 billion), up 9.8% on-year.
So far, the State Bank of Vietnam has deployed a package worth over VND300 trillion (US$13 billion) for enterprises and households, in the form of debt payment deferral and preferential loans. The MoF has also proposed a VND180 trillion (US$7.82 billion) package to support these people and enterprises. The government has also been implementing a VND62 trillion (US$2.7 billion) package to support 20 million poor and unemployed people. The government will also use about VND3.4 trillion (US$147.8 million) to deploy measures against COVID-19 this year.
Moreover, the NA is also expected to agree on a plan to reduce assorted taxes for enterprises, and this fiscal package will likely be worth hundreds of millions of US dollars. It is estimated that about 700,000 enterprises will benefit from the plan.
