BIDV Research Group makes 6 recommendations for 2024 growth target

Dr. Can Van Luc and the group of authors from BIDV Training and Research Institute made 6 recommendations to achieve the growth target of 6-6.5% in 2024 in the report "Vietnam's economy in the first quarter and forecast for the whole year 2024" just released.

GDP growth in the second quarter could reach 5.9-6.3%

In the context of the world economy still facing many difficulties, slow recovery, and forecasted lower growth than in 2023, Vietnam's economy in the first quarter of 2024 still achieved many positive results. Some bright spots emerged such as: The National Assembly and the Government accelerated institutional improvement, resolutely resolved difficulties and bottlenecks, and promoted growth; GDP in the first quarter grew at the highest rate in 5 years, reaching 5.66%, higher than the level set forth in Resolution 01 with growth drivers of export, investment, and consumption all increasing positively; The macro economy was basically stable, inflation was controlled; Interest rates continued to decrease, contributing to supporting people, businesses, and economic growth (credit is increasing again, in March alone, credit increased by nearly 1%...

However, Vietnam's economy still faces a number of major risks and challenges: External risks and challenges still exist and can negatively affect Vietnam's exports, investment, consumption and tourism; Economic restructuring and disbursement of some components of the three national target programs are still slow; Some traditional growth drivers are recovering slowly, while institutions for new growth drivers are slow to be issued; Enterprises still face many difficulties, the number of enterprises entering the market is lower than the number of enterprises withdrawing from the market; Credit growth is slow, bad debt and exchange rates are increasing but under control; The corporate bond market (TPDN) and real estate market are recovering slowly...

“In the context of slowing global economic growth but falling inflation and interest rates, along with internal recovery momentum and efforts to improve institutions and the investment and business environment, Vietnam's economy in the second quarter and the whole year of 2024 is forecast to grow higher while inflation is controlled within the target,” the research group forecast.

Specifically, according to the baseline scenario, GDP growth in the second quarter will continue to be positive, possibly reaching 5.9-6.3%, helping GDP in the first half of 2024 increase by 5.8-6.2% and the whole year of 2024 may increase by 6-6.5%, achieving the target set by the National Assembly and the Government. If conditions are more favorable, GDP growth for the whole year may also be more positive, at around 6.5-7% (positive scenario).

Forecast of GDP growth in quarters and the whole year of 2024 (Baseline scenario. Source: forecast of BIDV Training and Research Institute, April 2024)

Regarding inflation, the Research Group assessed that the pressure is greater and forecasted that inflation this year will be higher than in 2023 due to cost-push factors (in which, according to the preliminary estimate of the Research Group, the 6% increase in regional minimum wage from July 1, 2024 will cause the CPI in 2024 to increase by about 0.03 percentage points) and demand-pull factors (money supply and money circulation are forecast to increase higher than in 2023 along with the economic recovery momentum).

However, inflation in 2024 will remain under control and not cause for concern. The average CPI is forecast to increase by 3.4-3.8% in the baseline scenario, thanks to the combined impact of factors supporting inflation control (global prices and inflation are cooling down; oil prices are forecast to be at the same level or only slightly higher than in 2023; money supply increases but money turnover is still slow, forecast at about 0.7-0.9 times; exchange rates will be more stable and policy coordination will be better and better...).

Efforts to achieve goals

To achieve the above-mentioned growth, inflation control and macroeconomic stability targets in 2024, the Research Group has 6 main recommendations:

Firstly, ministries, branches and localities need to continue to seriously implement Resolutions 01 and 02/NQ-CP dated January 5, 2024; recent directives, resolutions and decrees of the National Assembly and the Government; continue to closely follow, proactively analyze and forecast developments in the international financial and monetary markets, developments in world oil prices to have appropriate response scenarios, including for increasing risks such as high-tech risks, cyber security, fraud, etc.; strengthen stabilization and improve the health of the financial, real estate and corporate bond markets to strengthen the confidence of investors and people.

Illustration

Second, promote institutional improvement, create a favorable environment for promoting growth and stabilizing the macro economy, focusing on: (i) promptly promulgate and more effectively implement policies and solutions to remove obstacles (especially in legal matters, land valuation, VAT refund, access to capital, social housing development, etc.); (ii) promptly promulgate Decrees and Circulars to guide the consistency and synchronization of the Laws passed by the National Assembly to overcome overlaps and obstacles, ensuring effective implementation; (iii) promptly promulgate institutions and legal frameworks to facilitate the development of the digital economy, green economy, circular economy and energy conversion, etc.

Third, promote economic growth, focusing on promoting traditional growth drivers (exports, investment - especially private investment - and consumption); better exploit new growth drivers which are also inevitable global trends (digital economy, green economy, circular economy, energy transition, regional connectivity). Accordingly, experimental mechanisms - Sandbox, pilot mechanisms, carbon credit market development projects, Plan to implement Power Plan VIII, support mechanisms for FDI enterprises when Vietnam applies global minimum tax..., need to be issued and implemented soon; promote the growth of economic locomotives such as Hanoi, Ho Chi Minh City and Da Nang (contributing 32% of the national GDP in 2023) to increase spillover and symbiosis.

Fourth, improve the effectiveness of policy management and coordination, especially between monetary policy, fiscal policy and other macroeconomic policies to promote growth, stabilize the macro economy, stabilize exchange rates, financial and monetary markets, and ensure social security.

Accordingly, fiscal policy plays a key role, expanding with focus and key points, associated with promoting public investment disbursement and tax exemption, extension and deferral policies similar to 2023. Monetary policy plays a supportive role, in a proactive and flexible direction, increasing access to credit associated with risk control and bad debt handling; focusing on controlling systemic risks (connection between banks - securities - insurance - real estate). At the same time, circulars on lending, investing in corporate bonds and debt restructuring should be amended soon, contributing to removing obstacles and increasing initiative for credit institutions and borrowers.

Fifth, promote the implementation of national target programs and public investment disbursement, especially for key projects with high spillover effects and infrastructure investment; promptly remove obstacles in implementation; focus on restructuring the economy to attract and allocate resources more effectively, especially weak projects and credit institutions to reduce risks and costs, and increase the health and efficiency of the market.

Finally, focus on recovering and developing the corporate bond market, real estate and gold market in a healthy and sustainable manner, in the direction of: (i) accelerating the removal of obstacles (especially in terms of legality, land fund, land valuation, site clearance, etc.) for real estate projects to free up resources; (ii) continuing to improve institutions related to the corporate bond market, real estate, promptly promulgating amendments to Decree 65/2022/ND-CP; (iii) effectively implementing Decision 1726/QD-TTg dated December 29, 2023 approving the Strategy for stock market development to 2030, in which the determination to upgrade the market in 2025, strengthen control of cybersecurity risks, information and data security; (iv) resolutely implement policies and solutions to restore and develop the real estate market stated in Resolution 33/2023/NQ-CP and related decrees, resolutions and directives, including early research to establish a Social Housing Development Fund to both contribute to the recovery of the real estate market and ensure the sustainability, attractiveness and feasibility of this long-term capital source; and (v) promptly amend Decree 24/2012/ND-CP on gold market management to help this market develop more stably, gold prices closer to international prices and still ensure the goal of reducing goldification in the economy, meeting people's practical needs for gold jewelry - fine arts...

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