GDP reassessment results used from 2021

From 2021, Vietnam will use the results of its GDP re-evaluation to formulate the goals in the Socio-Economic Development Strategy for 2021-2030 and the Socio-Economic Development Plan for 2021-2025.

A corner of Ho Chi Minh City. (Photo: NDO)
A corner of Ho Chi Minh City. (Photo: NDO)

Nhan Dan Online had an interview with Director General of General Statistics Office of Vietnam (GSO) Nguyen Thi Huong to clarify this issue.

Q: How will the use of the GDP reassessment in building the goals in the 2021-2030 Socio-Economic Development Strategy and the 2021-2025 Five Year Plan affect the macro indicators of the economy?

A: In 2018, GSO conducted a GDP reassessment in order to more fully reflect the economic situation of the country, thereby having a better basis for proposing and building policies and plans in line with the right development objectives and orientation. Therefore, the GDP reassessment results have been used by the Government to develop the Socio-Economic Development Strategy 2021-2030 and 2021-2025 Plan. The reassessment results show that, on average, the GDP increased by 25.4% in the 2010-2017 period. However, the GDP growth rate increased slightly (from 0.13% to 0.48%), so it did not affect the GDP growth target according to the proposed socio-economic development strategy and plan.

Q: This change shows the ability to expand State revenue, taxes as well as spending and borrowing. Many believe that this can lead to the possibility that Vietnam will actively increase public debt. What is your opinion on this issue?

A: The reassessment of GDP size leads to changes in relevant macroeconomic indicators such as the ratio of State budget revenue and expenditures on GDP, the ratio of State budget deficit to GDP, or the ratio of public debt, government debt and foreign debt on GDP. The reassessment has reduced the ratio of total tax revenue to the average GDP from 18.9% to 15% during the 2010-2017 period, the same as other countries in the region. This is a macro-financial comparison indicator that closely reflects Vietnam's reality, and at the same time assessing the reasonableness of taxes in the past period that have not fully gathered tax collection, nurtured revenue or encouraged production and business activities. In fact, budget collection is implemented in accordance with regulations and guidelines in current legal documents approved by the National Assembly or the Government. The review and reassessment of GDP scale helps State agencies, enterprises and production and business units to have the most complete and authentic information to make accurate and appropriate decisions, while exploiting and maximising resources for production and socio-economic development. Decisions on increasing government spending or increasing public debt are decided by the people and the National Assembly, based on the country's real socio-economic development and international context and in line with clear, transparent processes and regulations. We – the GSO – think that all decisions related to the budget and public debt will be carefully and thoroughly considered by the authorities for the sustainable development of the country.

GDP reassessment results used from 2021 ảnh 1

Director General of the General Statistics Office of Vietnam Nguyen Thi Huong. (Photo: NDO)

Q: The reassessment also creates a significant increase in the total value of GDP and GDP per capita, thereby affecting the orientation of socio-economic development in the next phases. Can you provide further analysis of this impact?

A: GDP is an important macroeconomic indicator reflecting the performance of the economy and is the basis for calculating many other macroeconomic indicators. When re-evaluated, changes in GDP size lead to changes in GDP per capita and other macroeconomic indicators. That affects the socio-economic development goals in the next stages. The macroeconomic indicators directed in the 13th National Party Congress’s Resolution have been built on the revalued GDP data. In which, the main changes are in GDP per capita, while other indicators have not changed significantly compared with the economic development orientation in the Resolution of the 12th National Party Congress. Specifically, the Resolution of the 13th Congress set the following targets: In terms of economy, an average 5-year GDP growth rate of about 6.5-7% per year. By 2025, GDP per capita will be about US$4,700 to 5,000. Thus, by 2025, GDP per capita will increase nearly 1.4 times compared to the rate of US$3,500 per person in 2020 according to the re-evaluated GDP data. In the old GDP scale, GDP per capita in 2020 reached US$2,780 and by 2025 GDP per capita will increase by 1.4 times, reaching nearly US$4,000. The target of reaching GDP per capita of about US$5,000 by 2025 is determined on the basis of the re-evaluated GDP scale in accordance with the nation’s reality of socio-economic development in recent years, and at the same time compared with countries with similar conditions as well as regional and international development trends. The orientation on average GDP growth target to reach about 6.5-7% per year in the 2021-2025 period, as set by the Resolution of the 13th Congress, is unchanged from the growth target of the previous period.

Q: But the growth target of about 6.5-7% per year will be a huge challenge. How is this growth rate compared to the published GDP scale different from the revalued GDP scale?

A: As analysed above, the Resolution of the 13th Congress orients the main socio-economic development targets in the 2021-2025 period that are built on the basis of the re-evaluated GDP scale, in which, the average 5-year GDP growth rate of about 6.5 to 7% is unchanged compared to the economic growth target of the previous period. However, the achieving the average economic growth target of 6.5 to 7% during the 2021-2025 period will be a big challenge for the entire Vietnamese economy for some main reasons: 2021 is the beginning year of the 2021-2025 period with many difficulties and challenges as the socio-economic activities of Vietnam and the world continue to be heavily affected by the COVID-19 pandemic. Although being one of the few countries in the world achieving positive growth, the sudden decline of economic growth in 2020 not only slows the pace and growth of the following years, but also changes the economic structure and declines some advantageous service industries being strongly invested and exploited, such as tourism, aviation, accommodation and catering. Moreover, Vietnam is in the period of resource accumulating for deploying economic restructuring and growth model transformation towards efficient use of resources and quality-based, sustainable growth. This takes resources and expands target markets. In the current economic recession around the world, the accumulation process will be affected, thereby extending the time required to achieve that goal. Vietnam's internal force is not strong, and the constrained external force will be one of the major challenges in the realisation of the economic growth goals for the 2021-2025 period.

Q: In 2013, GSO re-evaluated GDP in several sectors. How was the GDP reassessment result then used to build socio-economic development goals and what are the effects?

A: In 2013, GSO made a reassessment of GDP scale in the 2009-2011 period, but due to limited resources, it only focused on re-evaluating banking operations and self-owned and self-sufficient housing services. The reassessment results have affected macroeconomic indicators in this period, increasing the total value of GDP and GDP per capita by about 9%. Reassessed data DP in this period had been used to develop the 5-year socio-economic development plan for 2016-2020 with the target of GDP per capita in 2020 reaching the highest level of US$3,500, an increase of about 2.6 times compared with the rate of US$1,332 per person in 2010. If based on GDP scale that had not been revaluated, GDP per capita in 2020 was estimated at about US$2,780. Thus, GDP per capita in 2020 in the reassessed GDP would increase by about 26% compared to the old one.