Mr. Vu Hong Thanh, Chairman of the Economic Committee, commented that the economy is facing difficulties and it is unlikely that there will be a breakthrough in growth in the second quarter.
This comment was made by the Economic Committee when examining the Government's report on additional socio-economic development results in 2022; implementation in the first months of 2023, at the opening session of the National Assembly on the morning of May 22.
Mr. Vu Hong Thanh, Chairman of the Economic Committee, said that the economy showed signs of deterioration from the end of 2022, lasting until the beginning of 2023, resulting in GDP growth in the first quarter increasing by only 3.32%. To achieve the growth target of 6.5% this year, the average growth rate for each remaining quarter this year must be about 7.5%.
Difficulties in the financial market and corporate bonds make it difficult for businesses to access and mobilize capital, leading to a "freezing" of real estate. The main drivers of growth such as exports, foreign direct investment, especially industrial production, are decreasing and on the decline.
“The economy is really tough,” he said.
One of the main reasons for the decline in growth, according to Mr. Thanh, is that the industrial and construction sector grew by negative 0.4% in the first quarter of the year. In the first four months of the year, the index of industrial production (IIP) of the entire industry decreased by 1.8% compared to the same period last year, of which the IPP of the processing and manufacturing industry decreased by 2.1%. Electricity consumption figures for the first four months decreased by 0.4% compared to the same period last year, showing a decline in production activities.
With current difficulties, it is unlikely that there will be a breakthrough in GDP growth in the second quarter, according to Mr. Vu Hong Thanh.
Chairman of the Economic Committee Vu Hong Thanh presented the socio-economic audit report on May 22. Photo: Hoang Phong
At the same time, the Business Health Assessment Committee is declining. In the first four months of the year, nearly 79,000 businesses registered to establish new businesses and return to the market. On average, about 19,700 businesses are newly established and return to operation each month.
However, each month, 19,200 units withdraw from the market. Many businesses face great debt repayment pressure, so they have to transfer and sell shares at very low prices, in many cases to foreign countries. Businesses lack orders, and workers lose their jobs in many industrial parks.
According to the Vietnam General Confederation of Labor, nearly 547,000 workers at 1,300 enterprises had their working hours reduced or stopped working due to a decrease in orders from September 2022 to January 2023. 75% of these belong to FDI enterprises.
Businesses are facing cash flow difficulties, but accessing loans is difficult, with high interest rates. According to the Government's report, the average new lending interest rate is 9.3%, but data from the National Financial Supervisory Commission shows that the average lending interest rate at 35 commercial banks by the end of March was about 10.23%, 0.56 percentage points higher than at the end of 2022.
Another concern raised by the auditing agency is the slow handling of weak credit institutions, which negatively impacts the money market and affects banks' efforts to lower interest rates. Bad debt is on the rise, while the ratio of credit risk provisions to bad debt is decreasing, affecting the safety of the financial system.
Cross-ownership, mis-valuation of collateral, and lending to internal and backyard businesses are still complicated. In the context of businesses facing many difficulties, commercial banks are earning high profits.
According to the Government's previous assessment, Deputy Prime Minister Le Minh Khai said that GDP in the first quarter maintained its growth momentum but at a low rate, reaching only 3.32% over the same period. The consumer price index (CPI) decreased, with an average increase of 3.84% in the first four months.
By April 25, credit increased by 2.75%, the money market and exchange rate were basically stable. The average lending interest rate decreased by 0.7 percentage points compared to the end of 2022. Budget revenue for the first 4 months is estimated at 632,500 billion VND, equal to 39% of the annual estimate. Vietnam's trade surplus was nearly 7.6 billion USD, more than 3 times higher than the same period in 2022. Disbursement of public investment capital increased by 15,000 billion VND compared to the same period.
However, growth is slowing down, as shown by the GDP in the first quarter being 1.7 percentage points lower than the same period last year (5.03%). Production and business face many difficulties, especially in the industrial, construction and small and medium-sized enterprise sectors. Large, traditional export markets are shrinking, and businesses lack orders.
Deputy Prime Minister Le Minh Khai presents a socio-economic report on May 22. Photo: Hoang Phong
Newly registered FDI capital decreased by nearly 18%, implemented capital decreased by 1.2%. The total number of newly established and resuming enterprises decreased; the number of temporarily suspended and dissolved enterprises increased. Due to the accumulation of many years of inadequacies, the corporate bond and real estate markets are facing difficulties in liquidity and cash flow.
Labor supply and demand are locally unbalanced and there have been cases of unemployment in some localities and industrial zones. The unemployment rate among young people is still high, over 7.6%. The number of workers withdrawing social insurance at one time continues to increase, up more than 19% over the same period.
In addition to objective reasons, Deputy Prime Minister Le Minh Khai acknowledged that the above decline was due to subjective causes from the long-standing internal weaknesses of the economy that have only now gradually become apparent in difficult conditions. Analysis and forecasting of the situation to have response scenarios is still limited. A number of officials and civil servants are not yet resolute, timely, and sensitive, and there is also a mentality of avoidance, fear of responsibility, shirking responsibility, and fear of making mistakes.
The Government has proposed 10 solutions to achieve this year's growth target, emphasizing the viewpoint of maintaining the goal of stabilizing the macro economy, controlling inflation, promoting growth and ensuring major economic balances.
Measures to exempt, reduce, and extend taxes and fees; speed up value-added tax (VAT) refunds; remove difficulties for real estate projects, and support the restoration of cash flow for businesses are also priorities in the Government's management.
The next task mentioned by the Deputy Prime Minister is to promote the disbursement of public investment capital, with the target of reaching at least 95% this year; attract investment capital sources and encourage investment projects in the form of public-private partnerships (PPP).
However, with the existing difficulties, the Chairman of the Economic Committee suggested that the Government consider further lowering the operating interest rate to reduce loan interest rates to support growth. The Government also needs to consider adjusting the family deduction level for personal income tax, VAT and promptly correcting the shortcomings in the regulations on petroleum business and electricity price mechanism.
The agency also requested the Government to provide additional reports on debt structure related to real estate (real estate enterprises, home loans, real estate business).
Regarding this point, Deputy Prime Minister Le Minh Khai said that the Government will manage exchange rates and interest rates appropriately, direct the banking system to reduce costs, further reduce lending interest rates and implement a social housing credit package of VND120,000 billion.
The Deputy Prime Minister added that the Government will propose to the National Assembly a plan with a global minimum tax and exemption, reduction, and extension of taxes, fees, and charges; and accelerate value-added tax refunds to contribute to facilitating production, business, and import-export activities.
Previously, looking back at 2022 , Deputy Prime Minister Le Minh Khai said that last year's economy achieved high growth in a difficult context, with GDP increasing by 8.02%.
GDP per capita reached 4,109 USD, an increase of 34 USD compared to the number reported by the National Assembly at the last session of last year. Average CPI increased by 3.15%. Budget revenue reached more than 1.81 million billion VND, an increase of 12.5%.
The country's public debt, government debt, and foreign debt indicators have decreased and are within safe limits. Of which, public debt is 38% of GDP, government debt is 34.% of GDP, and foreign debt is 36.8% of GDP.
By the end of 2022, social security support policies had spent nearly VND 104,500 billion for more than 1.41 million employers and more than 68.4 million workers facing difficulties.
Last year, 13 targets assigned by the National Assembly were achieved and exceeded, but two targets, namely manufacturing and processing industry and labor productivity, did not meet the set targets.
Deputy Prime Minister Le Minh Khai said that these bottlenecks will be overcome by the Government in its direction and management this year to achieve the goal of stabilizing the macro economy, controlling inflation, promoting growth, and ensuring major balances of the economy.
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