Coordinate fiscal and monetary policies to support growth

Timely flexibility

At the Government meeting in June 2023, Prime Minister Pham Minh Chinh requested to give more priority to growth targets, promote three growth drivers (investment, export, consumption) associated with macroeconomic stability and ensuring people's lives, creating conditions for economic development.

At the Government Conference with localities in the first 6 months of 2023, there was also a high consensus on shifting monetary policy from the "tight" and "firm" control state at previous times to a "more flexible and loose" state. The timely adjustment aims to meet the urgent requirements of removing difficulties in liquidity and credit, promoting recovery, developing production and business, and being consistent with reality.

Dr. Can Van Luc, Chief Economist of BIDV , member of the National Financial and Monetary Policy Advisory Council, said: It is necessary to change monetary policy appropriately to restore and support economic growth. Although we loosen, we must be flexible, which means we still ensure the goal of stabilizing the macro economy. Only by coordinating more synchronously with other policies, including fiscal policy, disbursement of public investment capital and improving the investment and business environment, can we ensure the good implementation of the set goals.

Enterprises need capital to invest in production and business. Photo: Luong Bang.

National Assembly Delegate Phan Duc Hieu, Standing Member of the National Assembly's Economic Committee, assessed: At the time of drafting Resolution 43/2022/QH15 on fiscal and monetary policies to support the Socio-Economic Recovery and Development Program issued by the National Assembly, we envisioned that almost all socio-economic activities would be suspended. In that context, it is clear that monetary policy will be very ineffective. It is appropriate for us to use a tight monetary policy and a loose fiscal policy.

Now the context has completely changed. Labor, production and business have recovered to some extent, but businesses are still facing difficulties in terms of capital and cash flow. Second, our fiscal space has changed compared to before. Thus, policy adjustments are appropriate.

"We have agreed and come up with a core principle and formula for management, based on macroeconomic stability and combining and coordinating fiscal and monetary policies. When we have such a formula and the variables for our management change in each stage, it clearly creates a lot of room for making decisions more quickly.

In which, each problem in a period must combine many different variables. We come up with this formula to take into account the long term, because the coordinated fiscal and monetary policy does not only solve the immediate problem," Mr. Phan Duc Hieu shared.

Dry fields are irrigated

Assessing the shift in monetary policy from "tight and firm" to "flexible and loose" to date, Mr. Dau Anh Tuan, Deputy General Secretary, Head of Legal Department, Vietnam Federation of Commerce and Industry (VCCI) commented that "it is very appropriate in current requirements, very appropriate to the needs".

"I imagine this as the fields are dry and the government is trying to create water sources to irrigate these fields. Because business activities need capital, capital for businesses is like growing crops needs water. When there is a lack of water, it is clear that agriculture cannot develop, just like businesses lacking capital will definitely encounter difficulties," Mr. Tuan likened.

Looking at the whole year of 2022, we see that capital flow for businesses is facing many difficulties, first of all capital flow from bonds is difficult. After a period of boom, partly due to poor control, we have adjusted, leading to a freeze and difficulty in mobilizing long-term capital from bonds.

Meanwhile, there were other difficulties from the world market: Orders decreased, business operations were difficult, bank loans had very high interest rates... There was a period when interest rates were several hundred percent, which was difficult for normal business operations, let alone accumulation and development.

"Therefore, the current solution focuses on monetary policy to reduce interest rates and increase money supply to facilitate businesses to borrow capital. In our opinion, this is a very appropriate and necessary policy," Mr. Tuan shared.

Luong Bang

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