New Opportunities In Vietnam’s Economic Recovery In 202204/01/2022
The year 2021 will be full of changes, affecting all aspects of socio-economic development in the face of a resurgence and prolonged outbreak, with a new and dangerous strain of the COVID-19 pandemic. Facing difficulties and facing many new and unprecedented challenges, our Party and State have had many timely policies to direct economic development, production and business to realize the dual goal of “repelling the epidemic and preventing the spread of the virus.” economic development”, safe adaptation, flexibility, effective disease control. This is the basis, an important foundation for the Vietnamese economy to recover in the new normal by 2022.
THERE ARE BRIGHT SPOTS
In 2021, our country’s economy takes place in the context of intertwined advantages and disadvantages, but the reality shows that challenges are still many; The resilience and resources of the State, businesses and people decrease. In the first 11 months of 2021, the business sector, individual business households and other economic organizations have made efforts to overcome difficulties, creating an economic picture with bright colors.
The business community is dynamic and firmly in the flexible and effective management of Government, locally and the economic prospects of the country. In 11 months, the whole country had 105.6 thousand enterprises registered for new establishment, 40.5 thousand enterprises returned to operation, bringing the total number of newly established enterprises and enterprises returning to operation in 11 months to 146.1 thousand enterprises. The business sector has actively searched for product consumption markets, in the first 11 months of 2021, the industrial production index is estimated to increase by 3.6% over the same period last year, higher than the 3% growth rate in the same period of 2020 A number of key industries and key industrial products had high growth rates.
Foreign investment in Vietnam is a prominent highlight of the economy. Although in the third quarter of 2021, the economy “wobbled” because of the pandemic, in the first 11 months of 2021, registered foreign direct investment capital reached 26.46 billion USD in 18 fields. Processing and manufacturing industry has registered FDI capital up to 12.78 billion USD, accounting for 57.9% of total registered capital. The 11-month economic picture shows that the manufacturing and processing industry for export is the main driving force and also the leading field in attracting foreign investment.
In the context of the pandemic disrupting the supply chain, many export-manufacturing enterprises faced difficulties in input materials, high consumption markets, transportation and logistics fees, but export turnover in 11 months reached 299.67 billion USD, up 17.5% over the same period in 2020; in which, the export turnover of the foreign-invested sector reached 220.68 billion USD, up 20%, accounting for 73.6% of the total export turnover of the economy.
Import turnover of goods was estimated at USD 299.45 billion, up 27.5% over the same period last year; in which, import of means of production was estimated at 280.2 billion USD, up 27.9% and accounting for 93.6% of the total import turnover of goods. This is a group of goods used in production, creating growth momentum for the economy. The results in foreign direct investment and import and export activities of the economy show that foreign investors are placing great trust in Vietnam’s link in the global supply chain. The world community assesses that Vietnam plays an important role in promoting international trade and commits to expand investment in Vietnam in the coming period.
With bright spots in production, investment and international trade in the first 11 months of 2021, it reflects a gradually recovering economy. Economic forecast in the fourth quarter of 2021 will increase by 2-3% over the same period in 2020 and GDP for the whole year will increase by 1.6-2.1%. This is an important basis, creating high growth momentum in the coming time.
POINT TO REMOVE WOOD IN 2022
The COVID-19 pandemic has caused difficulties not only in the economic field but also in social issues. In the 11 months of 2021, there are 106.5 thousand enterprises temporarily suspending business; in which, 54.4 thousand enterprises withdrew from the economy, accounting for 51.5% of newly established enterprises. This reflects that the business sector, which plays an important role in economic growth and job creation, has been seriously hurt by the difficulties of the world and domestic economies.
Implementing the motto “people’s life is first, first”, so the prolonged social distancing has disrupted the chain of goods and labor circulation. Underemployment led to spending cuts and a sharp drop in aggregate demand in the economy. Total retail sales of consumer goods and services in 11 months decreased by 10.4%, significantly affecting the growth target of the economy.
Disbursement of public investment is slow, reaching 73.8% of the year plan, down 8.7% over the same period in 2020. Public investment plays an important role in economic growth and job creation. However, in addition to reasons such as high prices of iron and steel, construction materials, etc., there are a number of inappropriate regulations and a lack of responsibility on the part of individuals and organizations involved.
Although export turnover reached an impressive figure of 299.67 billion USD, up 17.5% over the same period in 2020, the export turnover of the domestic economic sector only reached nearly 79 billion USD, accounting for 26.4% of total export turnover and increased only 11.1% compared to 20% increase of the FDI sector. The supporting economy and the link between the domestic economic sector and the FDI sector are still weak and loose.
Agriculture and fisheries have always been a support in difficult periods of the economy, also facing many challenges in 2021. Prices of agricultural materials and feed for livestock and aquaculture have increased; Diseases in pig and poultry production are complicated; Market demand has not recovered, output prices of agricultural and aquatic products are low, making farmers lose money.
Currently, many businesses are facing difficulties in production and circulation of goods. This will cause commodity prices to rise, putting pressure on the economy’s inflation. Due to a sharp drop in aggregate demand in the economy, the consumer price index this year is lower than the target of 4%. However, the inflationary pressure of 2022 on our country’s economy is also present. The world prices of raw materials, goods and services increased; Crude oil prices will continue to rise in the coming years due to strong demand, limited supply and the crude oil market experiencing the longest supply shortfall in decades. The lack of upstream investment in oil production as demand increases is an indicator of high oil prices that persists for at least the next year.
Our country’s economy is highly dependent on imported raw materials, with the proportion of the cost of imported materials in the total cost of raw materials of the whole economy being 37%. The cost of petrol accounts for about 3.52% of the total production cost of the whole economy, especially when the world petrol price increases, it will increase the price of imported and domestic raw materials. In addition, investment and business stimulus packages and support packages also create great pressure on inflation in 2022.
CHANCE OF RECOVERY
Vietnam’s economy has many new opportunities to recover in 2022.
Firstly, Vietnam will have many improvements in both the dynamics and results of economic recovery and development compared to 2021. With experience, capacity and ability to cope with the epidemic continue to be improved, the ability to cope with the epidemic will continue to improve. Proactively producing a vaccine against Covid-19 will soon ensure the goal of vaccinating the entire population, the country will soon return to normal and the economy will recover quickly. Completion of vaccine coverage by the end of 2021, or by early 2022 at the latest, is one of the prerequisites for economic recovery and development.
In general, the economic recovery process in 2022 will face many challenges, many bottlenecks and bottlenecks that need to be resolved. Vietnam continues to face increasing inflation pressure, public debt ceiling and bank bad debt, limitations in the ability to meet human resources, equipment and infrastructure of the grassroots health care system. when the number of people needing medical assistance, social security is very large. The recovery of production and business may be hindered by financial difficulties and the consumption market. The ratio of credit to GDP is still high, the medium and long-term capital of the economy still mainly relies on the banking system.
Domestic consumption, which contributes about 68-70% of GDP, is likely to recover thanks to improved market sentiment and income. In addition, the private sector and FDI have the opportunity to recover production and business thanks to the recovery of both supply and demand sides, the adaptation of the business sector and support measures of the Government.
Second, the direct impact of economic support packages is enhanced. Vietnam needs to strengthen resilience through a robust and flexible social assistance system based on allocating additional capital to social assistance programmes; building a large-scale social registry and digital adoption, to quickly identify vulnerable people; scale up electronic payments, to effectively reach identified beneficiaries.
The Government has set out the overarching goal of “safely adapting, flexibly, effectively controlling the Covid-19 epidemic, protecting the people’s health and life to the full extent”, along with “making good use of all available resources” to promote socio- economic recovery and development with comprehensive solutions”. Continue to maintain macroeconomic stability, improve the autonomy, resilience and adaptability of the economy; strive to increase GDP by 6-6.5%, average CPI growth rate of about 4%; State budget deficit is about 4% of GDP… for the whole year 2022.
Third, many solutions are implemented synchronously. In the context that the epidemic can be prolonged, the main tasks and solutions are to focus on flexibly and effectively implementing the goals of both disease prevention and control while recovering, economic and social development, ensure the people’s health, life and social security.
Besides, it is necessary to control inflation, limit bad debts arising, maintain the bad debt ratio on the balance sheet below 3%; boost production, business, export, speed up disbursement of public investment capital.
Development support policies need to pay attention to creating stimulus for both aggregate supply and aggregate demand; strengthen the macroeconomic foundation and promote deeper economic institutional reform, creating more “bounce” for businesses.
HOT DESTINATION OF INVESTORS
In 2022, Vietnam is still an attractive destination for investors in the medium term with many strong foundation conditions. In order to take advantage of new opportunities for Vietnam’s economic recovery in 2022, it is necessary to implement a number of solutions as follows:
Firstly, Vietnam needs to deploy, implement well and safely a large-scale vaccination campaign for the entire population. The Government, ministries, branches and localities shall urgently complete vaccination for the entire population of vaccination age in order to soon achieve the rate of community immunity vaccination; give priority to the labor force of the enterprise sector and individual business households so that these two production areas can soon return to production and business.
Secondly, harmoniously combining fiscal and monetary policies, focusing on fiscal policies to support businesses and individual business households to overcome difficulties. At the same time, using monetary policy at the right dose and in a reasonable manner, without paying too much attention to monetary policy to remove difficulties and promote growth because of credit support and lowering interest rates for businesses will lead to increasing inflation and risks to the banking system.
Thirdly, improve disbursement capacity and effective use of investment capital: Make focused and focused investments in key industries and fields, driving force areas, growth poles, and large projects , important national, inter-regional connectivity project. In particular, improve the efficiency of using public investment capital to create spillovers to private investment and the FDI sector; exploiting the strengths of the signed trade agreements in order to improve the efficiency of international trade activities and boost exports; enhance opportunities to attract and utilize FDI inflows.
Fourth, to quickly and effectively restructure the economy. Internal restructuring of each industry towards promoting comparative advantages and participating in global value chains; concentrate internal resources, promote the development of products with comparative advantages, competitiveness and high added value.
Fifth, proactively prepare sufficient conditions to promote production and business, ensure supply and circulation of goods, and reduce inflationary pressure. For short-term shortage of goods, it is necessary to have policies and solutions to cut production costs and import raw materials in a timely manner; strengthen inspection, examination and resolute handling when detecting acts of speculation, hoarding or manipulating prices; implementing solutions to connect, ensure an appropriate supply of labor for the people; proactively provide labor market information, develop plans and programs for coordination among localities in the supply and recruitment of labor to create connection and interconnection in the labor supply chain between localities…
Sixth, strengthening the implementation of digital transformation in institutional reform and administrative procedures is very important. Digital transformation in institutional reform and administrative procedures is very important. Meanwhile, traditional administrative procedures and application of technology in handling administrative procedures currently do not meet the requirements and demands of people and businesses in the new context. There are many support packages that are entangled in administrative procedures. Procedural barriers not only causes difficulties, but also create unfairness for the business community in accessing policies and distort the business environment. In addition, there should be cooperation and coordination agencies, ministries, branches and localities to establish a decentralized mechanism to create convenience not only in the country, but also in the international arena.
Seventh, creating an inter-connection policy, connecting the supply chains of goods and services with consensus at local governments, solving the situation of “inconsistency” that hinders . In order to restore supply chains and production and export activities, it is necessary to maximize the circulation of goods and workers to serve the recovery of production after the epidemic, to avoid the situation of “sands” without a hitch. At the same time, ensure adequate supply of raw materials, materials and energy.
Regarding import and export, it is necessary to continue to closely monitor the epidemic situation and the exchange of goods between countries to advise the Government on management solutions to deal with adverse factors. Pay attention to the implementation of Free Trade Agreements in general, especially new generation FTAs. Organize online trade promotion, focus on logistics…
Promote circulation and distribution of goods between localities to ensure the supply of essential goods to serve people’s needs. Implement programs to stimulate domestic consumption, such as: organizing promotional months nationwide, mobile sales programs, market stabilization programs… Strengthening activities to connect supply and demand and promote trade domestic market trade. Promote the application of e-commerce in the circulation and distribution of goods.