The government has officially reported to the National Assembly (NA) that in 2020, total state budget revenue may fall VND163 trillion (US$7.08 billion) as compared to initial estimates, leading to a budget deficit of 4.75% of GDP, up 1.31% against the initial target, and public debt will likely be 55.5% of GDP, up 3.2% against the initial goal.
The key reason is the poor performance of enterprises and a rise in government spending for overcoming the consequences of COVID-19.
This figure is estimated based on a forecast that the economy may grow 5.4% this year, and that 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, state budget revenues will be far lower.
Prime Minister Nguyen Xuan Phuc ordered ministries, agencies, and localities to “strengthen financial and state budget discipline, with radical thrift in recurrent spending, and a cut-off point for costs for meetings and business trips.”
Under a draft resolution of the government on the tasks and solutions for removing difficulties for production and business, as compiled by the Ministry of Planning and Investment (MPI) and expected to be enacted soon, the government will cut 70% of costs for organising domestic and overseas meetings and business trips from May to December in relation to ministries, central agencies, and localities, excluding the ministries of Defence, Public Security, and Health.
“All revenue and expenditure 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 so as to support labourers, production, and businesses.”
Vu Hong Thanh, Chairman of the NA’s Economic Committee, also told the legislature that one of the most important things in order to effectively manage and use the state budget is to “decisively trim the recurrent spending of state agencies.”
According to the General Statistics Office, recurrent spending often accounts for nearly 70% of total budget spending. Last year it was VND928 trillion (US$40.35 billion), or 71.4% of the total state budget spending of VND1.3 quadrillion (US$56.5 billion).
In the first four months of the year, while total budget expenditure was VND472.1 trillion (US$20.5 billion) – up 9.8% on-year, recurrent spending hit VND291.6 trillion (US$12.68 billion) or 62%.
Also in the first four months, 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 activities, causing a decline in their contribution to the state budget,” said MPI Minister Nguyen Chi Dung.
A survey conducted in March by the National Advisory Council for Administrative Reform found that 74% of surveyed firms expected to have to shut down operations temporarily if COVID-19 is not fully controlled by June 2020.
The economy’s four-month index for industrial production rose only 1.8% year-on-year, with the mining sector decreasing 6.8% on-year, the MPI reported.
In one specific case, the average price of crude oil for April fell by US$20 per barrel or 33% against February, and in the first three months decreased 6% against the initial target of US$60 per barrel, and 14% against the same period last year.
PetroVietnam stated that such serious occurrences 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 91% of the initial plans, 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), equivalent to 90.6 and 89.7% of the initial targets, respectively,” PetroVietnam said in a statement.
The reduction in global oil prices will likely result in a decline 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, reported the Ministry of Finance.
