Taking advantage of opportunities for strong growth

Opportunities and challenges are still intertwined in the recovery and development of the Vietnamese economy; however, the positive trend has spread more widely across all fields and industries in the second half of 2022.
Stainless steel pipe production line at Son Ha International Joint Stock Company, Phung Industrial Park in Hanoi. (Photo: DUY DANG)
Stainless steel pipe production line at Son Ha International Joint Stock Company, Phung Industrial Park in Hanoi. (Photo: DUY DANG)

Striving for GDP growth of 7.5%

Industrial production has regained momentum and growth in the past eight months as achieving growth of 9.4% in the index of industrial production (IIP) over the same period last year. In particular, the processing and manufacturing industry continued to be the driving force of growth with an increase of 10.4%, contributing 8.1 percentage points to overall growth.

On the other hand, 61 out of 63 provinces and cities recorded an increase in their industrial production index, including many localities with a very high IIP growth thanks to their processing and manufacturing industry. Another bright spot is that the export turnover reached 250.8 billion USD, a year-on-year increase of 17.3%, helping the trade balance maintain a trade surplus of about 3.96 billion USD (with a trade deficit of 3.52 billion USD in the same period last year).

In the past eight months, there were 30 commodities with an export turnover of more than 1 billion USD, accounting for 91.8% of total export turnover. Meanwhile, there were six exported commodities with over 10 billion USD, accounting for 63.4%. The highlight of the economic picture at the end of the third quarter has been the rebound of tourism, services and domestic consumption. According to the General Statistics Office, total retail sales of consumer goods and services was estimated to have increased by 19.3% over the same period last year. The tourism sector continued to recover positively with the a high number of domestic tourists and international arrivals, increasing by 12.7% over the same period in 2022.

According to Minister of Planning and Investment Nguyen Chi Dung, the economy has witnessed positive recovery since the beginning of the year and is expected to grow beyond the set target if greater efforts are promoted. GDP growth is forecasted to reach more than 7.5% over 2022.

In addition to the growth drivers being unlocked and promoted, great room for economic growth lies in the more substantive implementation of the programme on socio-economic recovery and development. According to the Ministry of Planning and Investment, the disbursement of support policies under the programme has reached about 55.5 trillion VND, including preferential loan packages through the Vietnam Bank for Social Policies, supports on rent houses for workers, assistance related to interest rates and the reduction of taxes and fees.

In addition, the disbursement of public investment is expected to be accelerated at the end of the year as the Government has been drastically implementing many solutions to remove bottlenecks in this field and the prices of some construction materials are cooling down. Another favourable factor for public investment is that as a rule, capital disbursement is usually accelerated at the end of the year due to the characteristics of investment and construction activities.

International organisations have also recognised and highly valued the prospects of Vietnam's economic recovery and development. On September 6, Moody’s Investors Service upgraded Vietnam’s long-term issuer and senior unsecured ratings to Ba2 from Ba3 and changed the outlook to stable from positive.

Earlier in May, credit rating agencies S&P Global Ratings and Fitch Ratings assessed that Vietnam’s economy was recovering better than expected and announced a stable and positive outlook.

Many new challenges

The general trend of many international organisations is to raise their growth forecast for 2022 but lower their growth forecast for 2023 due to the great risks and challenges of economic recovery.

The Ministry of Planning and Investment also said that economic growth is likely to be more difficult in the fourth quarter of 2022 and in 2023. The identified challenges are that production and business activities that have recovered still face many difficulties mainly due to the high prices of gasoline, input materials and production costs as well as a shortage of labourers in several localities.

On the other hand, disadvantages in the international situation have strongly affected the production, imports and exports and the enterprises’ ability of fulfilling their obligations to the State.

Minister of Planning and Investment Nguyen Chi Dung pointed out the difficulties that the production and business community is facing. Firstly, it is difficult to forecast the prices of commodities and gasoline in the world. Secondly, oil prices have increased while it is the main source of raw materials for production and consumption. Other difficulties have been the shortage and disruption of the supply of materials and products and the rising global production and transportation costs. They have put pressure on inflation and domestic commodity prices.

These factors have not been completely resolved in the short term, but new factors have appeared, especially the drought situation in China and the EU, which can greatly affect the supply of food and industrial inputs in the world and the region in the short term. The stock market, corporate bonds, and real estate have many potential risks as regulations on private bond issuance are being perfected slowly, affecting new capital mobilisation channels for businesses and increasing pressure on the banking system.

In that context, maintaining macroeconomic stability, controlling inflation, promoting growth and ensuring the major balances of the economy are still the Government's point of view in term of its guidance. The important solution emphasised by the Ministry of Planning and Investment is the fast, effective and substantive implementation of the socio-economic recovery and development programme. It is essential to closely monitor the situation and take advantage of all opportunities to boost the socio-economic recovery and development and maintain the growth momentum in the long term while exploiting new growth drivers.

Deputy Director of the Import-Export Department under the Ministry of Industry and Trade Tran Thanh Hai said the department will continue to focus on removing difficulties for enterprises to boost production, especially supporting enterprises in finding alternative sources of raw materials with suitable prices, assisting enterprises to make good use of signed free trade agreements to speed up production and exports and enhancing information dissemination and forecasting of domestic and international commodity markets. In addition, trade promotion will be promoted and the distribution of goods via digital platforms and e-commerce will be enhanced towards expanding domestic market and developing Vietnamese brands.

According to the Ministry of Planning and Investment, the rapid and unpredictable changes of the economic situation require a quick, focused, effective and promptly policy response. All ministries and sectors need to be proactive and flexible in their actions, as well regarding promulgation and implementation of fiscal policies.

Support policies need to be carried out with right focus on enterprises and people, especially poor and low-income people. In addition, fiscal space should be ensured to support the economy after 2023.