Much room for 7% GDP growth in 2024?

The Central Institute for Economic Management (CIEM) has just forecasted two GDP growth scenarios in 2024, in which scenario 1 is Vietnam's GDP growth of 6.55% and scenario 2 is 6.95%. To clarify this forecast, the reporter had an interview with Mr. Nguyen Anh Duong - Head of the General Research Department - Central Institute for Economic Management.

Could you please tell us what is the basis for CIEM to propose a GDP growth scenario of 6.95% in 2024?

Based on the assessment of the domestic and world economic situation in the first months of 2024, CIEM has proposed two scenarios to update the GDP growth outlook for the whole year 2024. In scenario 1, the normal scenario, GDP growth is forecast to reach 6.55% (in 2024), inflation is 4.32%, export growth is 9.54%. In scenario 2 (positive scenario), GDP growth could reach 6.95%, average inflation is lower, at 4.12%, export growth is about more than 11.64%.

Mr. Nguyen Anh Duong - Head of General Research Department - Central Institute for Economic Management

The positive scenario assumes that the world economy can recover faster, some major economies are more aggressive in cutting interest rates and thereby affecting consumption and import demand.

In addition, prices on the world market may cool down. For example, the General Statistics Office announced that Vietnam's import price index in the first 6 months of the year decreased by 2.15% compared to the same period last year, then the positive scenario assumes a 4% decrease in import prices in 2024 compared to the previous year. If this scenario occurs, the price pressure on Vietnam will be significantly reduced.

Scenario 2 also assumes that Vietnam will carry out strong reforms to improve growth, focusing on labor productivity and investment quality, as well as regional and new economic linkages. Regarding these reforms, the Government and the Prime Minister have directed strongly in the recent past with many positive changes. If the proposed reforms are effectively implemented, and those reforms are soon promoted in labor productivity, in the efficiency of the public sector, creating a spillover effect on private investment and foreign investment, then Vietnam can have positive hopes for growth and inflation results. If there are more favorable developments in the world economy, GDP can increase by nearly 7% and CPI can increase by 4.12%.

In the high scenario, CIEM forecasts that Vietnam's GDP growth in 2024 could reach 6.95%.

CIEM's report also mentioned the issue of labor productivity, so what is the reason why labor productivity in Vietnam is still low compared to other countries in the region and the world, sir?

Recently, the Government and the Prime Minister have paid great attention to the content of increasing labor productivity. The Prime Minister signed Decision No. 1305/QD-TTg approving the National Program on increasing labor productivity to 2030, which is also a very important content, aiming to contribute to restructuring the economy and improving the quality of national competitiveness.

But labor productivity is related to many ministries and sectors, and labor productivity is not only about the skills and adaptation of workers to the new economic model, but also about the ability to learn new knowledge or the coordination between ministries and local sectors in policy making, creating a favorable business environment. Accordingly, the issue of labor productivity in Vietnam is very complicated. It should be noted that Vietnam's absolute labor productivity may be lower than that of many economies, especially those in the region, but we need to try to improve it as quickly as possible. In other words, what many businesses are interested in is not the absolute level of labor productivity but the rate of improvement in labor productivity that Vietnam is achieving and can achieve in the future.

According to the General Statistics Office, labor productivity at current prices in the first 6 months of the year increased by 10.2% compared to the same period last year. If we exclude the price factor, the labor productivity growth rate has reached more than 6% compared to the same period last year. If we create momentum for the growth of the public sector so that they work faster, more, and more responsibly, labor productivity in the public sector can improve rapidly and create spillovers to the private sector and the foreign-invested sector.

To achieve GDP growth of nearly 7% as proposed in the scenario, what fiscal policy do you think should be implemented in the last months of the year?

It can be said that the fiscal solutions that we have implemented in the past time, the story of reducing value added tax in the last 6 months of the year or increasing salaries from July 1st have shown great efforts of the Government, the Prime Minister and the entire political system. These solutions are also based on very close assessments of the room for fiscal policy. The solutions and policies that have been implemented are all suitable for Vietnam's fiscal space. Vietnam still has room to implement many contents related to policies to support the business community and people.

However, at this point, the economy is showing signs of more positive recovery; therefore, it is only necessary to implement well the fiscal policies set out at the beginning of the year, including disbursing public investment capital according to the assigned plan, while creating a playground to support businesses to overcome temporary difficulties, thereby recovering soon. Accordingly, it is necessary to boldly put trust in the business community, because this is the main driving force for economic growth. If we can do that, we will support the business community with appropriate fiscal solutions while still maintaining fiscal space to respond to future shocks.

In the first 6 months of the year, monetary management had many bright spots.

So if we achieve a growth rate of nearly 7% as per the proposed scenario, what will be the pressure on monetary policy in the last months of the year, sir?

In the first 6 months of the year, monetary management had many bright spots. First was interest rate management: Vietnam maintained a low interest rate level. Compared to many economies in the region, Vietnam is the leading country in reducing interest rates. Many countries still maintain high interest rates for a longer period than expected.

Second , the exchange rate management is very flexible, proactive and tight. The central exchange rate increases more slowly than the exchange rate on the free market or the selling rate of commercial banks. The level of fluctuation of the VND/USD exchange rate - showing the exchange rate fluctuates more or less - on the Vietnamese market is much lower than the USD Index on the international market. This means that when foreign investors consider or expand their investment in Vietnam, they will benefit from the stable exchange rate, thereby creating favorable conditions for production and business.

Looking to the future, expectations and requirements for the State Bank's operations are very high. We are faced with many scenarios for interest rate management of key economies, including Vietnam's major partners. Or the requirement to promote quality credit growth, in line with the absorption capacity of the economy, with Vietnam and the needs of businesses. If there are favorable conditions from the world economic recovery, I believe that, with the State Bank's operating experience in recent times, monetary policy management activities will achieve positive results, contributing to GDP growth in 2024.

Thank you!

Source: https://congthuong.vn/nhieu-du-dia-cho-tang-truong-gdp-7-trong-nam-2024-331846.html