The government has just sent a report to the National Assembly on the state budget in this year. It is expected that Vietnam will see a budget deficit of VND343.7 trillion (US$14.94 billion).
In 2021, it is expected total state budget revenue will be VND1.38-1.41 quadrillion (US$60 billion-61.3 billion), up 3.2-5.4% as compared to initial estimates. Of which domestic revenue will likely hit VND1.16-1.18 quadrillion (US$50.4 billion-51.3 billion) – up 2.4-4.6%; revenue from crude oil exports is projected to sit at VND33.6 trillion (US$1.46 billion) – up 0.4%; and revenue from export-import activities is predicted to reach VND184-189 trillion (US$8 billion-8.21 billion), up 3.1-5.9%.
In terms of state budget expenditure, the total sum is expected to be VND1.73-1.76 quadrillion (US$75.2 billion-76.52 billion), a year-on-year rise of 2.5-4.3% in comparison with the initial estimates. Of which, capital for development investment will likely be 95-100% of the initial plan, and recurrent spending will likely hit almost 100% of the initial plan.
“The government will continue to apply solutions to increase revenue and conduct spending in a careful manner, with expenditure to be further curbed in order to supplement the country’s fight against the COVID-19 pandemic. The government will also try to trim down state budget overspending,” said Minister of Finance Ho Duc Phoc.
Cut down on spending
The government has asked ministries, agencies, and localities to prepare plans to review state budget expenditure so as to gather money for rapid economic recovery and development.
“It is needed to trim down recurrent spending, and eradicate negative actions and wastefulness in state budget spending,” said another government report also sent to the legislative body. “All violators must be stringently sanctioned. Budget revenues must be increased in all localities, especially those from stable and sustainable sources.”
The government has also agreed there will be a reduction of at least 50% of the remaining costs of ministries, central agencies, and localities for organising conferences and business trips at home and abroad – save important and imperative activities in service of fighting the pandemic of the ministries of Defence, Public Security, and Health; and except for costs incurred in implementing the external activities of the Ministry of Foreign Affairs.
Furthermore, the government will also withdraw recurrent expenditure sums already allocated to ministries, central agencies, and localities but yet to be disbursed and implemented as of June 30, 2021. These sums will be the supplements for state and localities budgets for preventing and battling the COVID-19 pandemic and to fuel the national vaccine strategy.
The government’s move is made in the context of COVID-19 becoming all the more complicated and severely damaging socioeconomic development, while demands are growing for expenditure for fighting the pandemic and protecting people’s lives and struggling enterprises.
Both last year and the first six months of this year, the state has spent VND21.5 trillion (US$934.8 million) – including VND16.8 trillion (US$730.43 million) in 2020 and VND4.7 trillion (US$204.3 million) in the first half of 2021.
Specifically, the money has been used for purchasing vaccines, medical materials and equipment, and for supporting anti-pandemic forces including healthcare staff, army, and police. About VND8.4 trillion (US$365.2 million) has been used to assist isolated people.
In addition, the prime minister has decided to supplement VND7.65 trillion (US$332.6 million) to the Ministry of Health to purchase 31 million vaccine doses from Pfizer and 30 million Vaccine Astrazeneca vaccine doses from VNVC.
The government has asked the Ministry of Finance to guide cities and provinces nationwide to tighten financial and state budgetary discipline and to limit recurrent spending.
In the first half of this year, state budget expenditure reached VND694.4 trillion (US$30.2 billion), of which 72.14% or VND501 trillion (US$21.78 billion) ws recurrent spending. Other kinds of spending were development investment capital of VND133.9 trillion (US$5.82 billion) and interest payments of VND56.8 trillion (US$2.47 billion).
Meanwhile, total state budget revenue hit VND775 trillion (US$33.69 billion). Of which domestic revenue totaled VND633.1 trillion (US$27.52 billion), revenue from crude oil exports stood at VND18.5 trillion (US$804.34 million), and revenue export-import activities sat at VND122.8 trillion (US$5.34 billion).
Thus, there was a surplus in the state budget of VND80.6 trillion (US$3.5 billion) in the first six months of this year.
Difficulties ahead
In the first six months of 2021, 70,200 enterprises halted operations, or were awaiting disbandment, or completing bankruptcy procedures – a year-on-year expansion of 24.9%. There has been an average of 11,700 enterprises withdrawing from the market every month.
“Our country’s economic growth in the first six months of 5.64% remains lower than the initially-set target, while there have been enormous difficulties due to the COVID-19 pandemic,” said NA Chairman Vuong Dinh Hue. “Production and business, and people’s lives in general are facing massive difficulties.”
In 2021, the Vietnamese economy witnessed a total state budget shortfall of US$11.87 billion, because of COVID-19 causing a drop in enterprises’ production and business activity. This made them unable to make their usual contribution to the state budget.
Policies on deferred tax payments and directly supporting businesses and the public have also amounted to tens of billions of US dollars.
The EuroCham Chamber of Commerce in Vietnam (EuroCham) has just released its Business Climate Index (BCI), with the results demonstrating that the fourth wave of the coronavirus in Vietnam has dented the confidence of European business leaders.
According to EuroCham, before the fourth wave struck, the BCI had almost climbed back to pre-pandemic levels, reaching 73.9 in quarter one. However, this latest outbreak and the spread of new variants have seen the index fall almost 30 points in quarter two to 45.8. This is a significant drop, though not as steep as during the first outbreak of the pandemic in 2020.
The fourth wave has also led to increased pessimism about the short-term outlook for Vietnam’s business environment. Just 19% of respondents believed that the economy will stabilise and improve in the next quarter. That is down from 61% in the first quarter.
“The EuroCham BCI reaffirms the urgent need for Vietnam to accelerate vaccination. Local lockdowns, social distancing, and travel restrictions are not permanent solutions and will cause significant economic harm over the long-term, as our data shows,” said EuroCham chairman Alain Cany.
“There is no route out of this fourth wave without an ambitious and accelerated mass vaccination program which will enable normal life to resume. European companies are prepared to cover the cost of protecting their own staff – this will help to speed up vaccination while also reducing the financial and administrative burden on the state. But we need access to sufficient supplies,” Cany said.
The BCI also showed the urgent need for Vietnam to roll out a mass vaccination programme. About 58% of respondents predict that their companies would see a significant, negative impact if their staff are not vaccinated in 2021. Meanwhile, 44% of surveyed firms have not been approached to prepare for vaccination.
Last November, the NA passed a resolution on its budget estimates for 2021. In this, total state budget revenue and spending will be over US$58.4 billion and US$73.34 billion, respectively. Total state budget deficit will be US$14.94 billion, accounting for 4% of GDP.
