Great expectations for the socio-economic recovery programme

The National Assembly has passed a resolution on fiscal and monetary policy with a value of about 350 trillion VND (15.21 billion USD) to support the socio-economic recovery and development programme in 2022 and 2023. The main goal of the programme is to continue to share difficulties with the people, support businesses to maintain and stabilise production and business, as well as create more room for stronger and more sustainable development.

Tourists from the Republic of Korea visit Phu Quoc Island in Kien Giang Province within a programme applying vaccine passports. (Photo: Duy Dang)
Tourists from the Republic of Korea visit Phu Quoc Island in Kien Giang Province within a programme applying vaccine passports. (Photo: Duy Dang)

The support package has received a lot of attention from the public. According to calculations, without the support programme Vietnam’s GDP growth in 2022 could only reach 4.5 to 5% and would face a very difficult recovery in the context of many uncertainties in the world caused by the impact of the COVID-19 pandemic.

Creating a foundation for long-term growth

Regarding the fiscal policy, the NA agreed to reduce the value-added tax rate by 2% in 2022, applicable to groups of goods and services currently applying the 10% value-added tax rate, excluding a number of groups of goods and services including telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, etc.

Development investment spending from the State budget will increase at the highest level of about 176 trillion VND in 2022 and 2023, of which a maximum of 14 trillion VND will be invested in healthcare. Interest rate support (2%/year), with a maximum amount of 40 trillion VND, will be allocated through the system of commercial banks and will support several important industries and fields, businesses, cooperatives and business households that have the ability to recover and pay debts.

Regarding the monetary policy, debt repayment terms will continue to be restructured and the same debt group will be maintained, loan interest will be exempted and reduced for customers affected by the COVID-19 epidemic. The National Assembly also agreed to use a maximum of 46 trillion VND from other legal financial sources to import vaccines, therapeutic drugs and medical equipment and supplies for the prevention and control of the COVID-19 epidemic in case of necessity.

Lauding the NA resolution and the draft economic recovery programme built by the Government, Dr. Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV), said that the scale of support policies is not large, as suggested by researchers and businesses, but this is a number that the NA and the Government have balanced in all aspects, from budget capacity and absorption capacity to the potential risk of consequences.

Moreover, this programme has many positive points. That is a relatively clear definition of the target, subjects, and scale, with a focus on essential contents such as investment in health to serve the epidemic prevention and control; infrastructure investment that will bring both short-term and long-term impacts; and support to reduce costs for businesses, including reducing value-added tax, reducing land rent instead of extending or delaying as much as before, and has the component to increase capital access for businesses more clearly through reducing interest rate.

The programme will also pay more attention to those who are strongly affected by the pandemic such as transport and tourism activities, workers. And there is also a relatively specific assessment of the programme's impact on economic indicators such as growth, public debt, and budget deficit.

Meanwhile, Dr. Vo Tri Thanh, Director of the Institute for Brand and Competitiveness Strategy expressed his belief that if the policy orientations in the Government’s Resolution No.01/NQ-CP on socio-economic development, the state budget and the socio-economic recovery programme are implemented effectively, Vietnam's economy could achieve the target of 6-6.5% growth. Without the support programme, Vietnam's GDP growth would only reach 4.5-5%.

Great expectations for the socio-economic recovery programme ảnh 1

Producing household appliances at a factory of Sunhouse Group in Quoc Oai District, Hanoi. (Photo: Dang Duy)

Great importance is attached to organisation and implementation

After the NA’s resolution, the Government needed more time to issue a socio-economic recovery programme to be implemented in 2022 and 2023 and the business and production community has high expectations for the “push” from these support policies.

Director of Delta International Co., Ltd., and member of the Executive Committee of the Vietnam Logistics Business Association Tran Duc Nghia said that the permanent difficulty of logistics enterprises in the past two years is cash flow, because investment costs are high while revenue has continued to decline.

Resolution No.128/NQ-CP has been implemented, production and business activities have been “untied” but cannot return to the normal state. The interest rate support policy is not strong enough for businesses, while the debt restructuring is not long enough for the market to recover.

These issues have been raised in the draft programme and businesses are expected to create many positive points when the policy is issued. However, support policies need to hit the right target, and to be implemented in an open and transparent manner with good supervision so that resources can go to the right places and do not pose great risks to the goal of maintaining macroeconomic stability.

From the perspective of businesses operating in the sectors that has suffered the most from the pandemic, especially aviation and tourism, Chairman of the Board of Directors of Vietravel Holdings Joint Stock Company Nguyen Quoc Ky paid special attention to the effectiveness of the socio-economic recovery programme’s implementation. According to Mr. Ky, after the crisis, all businesses, regardless of their size and history, must line up on the starting line. Any business that pops up quickly will get the market.

Enterprises need a strong momentum from the Government's support packages. Saving businesses is like saving patients, Ky said, adding that if the effectiveness of epidemic prevention and control depends on the level of vaccine coverage and the curative capacity of the health system, the effectiveness of the economic recovery programme will also depend on the size of the support package and the speed of deployment to save businesses from bankruptcy. Opening up and maintaining economic activities in a continuous and consistent manner is the best support policy for businesses in the coming time, he noted.

According to Dr. Nguyen Dinh Cung, former director of the Central Institute for Economic Management, the economic recovery programme needs a stronger, different and more drastic solution, aiming to perfect institutions and reform administrative procedures; as well as improve the business environment; promote the development of new industries and business models, digital transformation, digital economy and creative innovation.

In addition, the Government also needs to have a clear message on decisively opening the economy in a flexible manner to create confidence for the whole society. Only in this way can growth momentum be created to overcome the difficulties caused by the impact of the COVID-19 pandemic, as well as to realise the goal and aspiration of becoming a developed country.

Translated by NDO