Economic growth needs domestic consumption to break through

Buffers support growth in volatile environments

According to Mr. Nguyen Bich Lam, former Director General of the General Statistics Office (now the General Statistics Office), total social consumption, including the majority of personal and household spending and a smaller proportion from the Government, accounts for over 60% of GDP. This is also the reason why in recent years, the Government has implemented many solutions to promote domestic consumption, thereby stimulating the development of manufacturing and service industries.

Especially in the context of global economic fluctuations, domestic consumption acts as a buffer to help stabilize the Vietnamese economy. Because when exports face difficulties, domestic consumption will be an important driving force to help maintain economic growth.

However, to make this buffer strong enough to boost economic growth to over 8% in 2025, aiming for double-digit growth in the next period is a challenge. In the first two months of 2025, the total retail sales of goods and consumer service revenue of the economy increased by 9.4% over the same period last year. Although this figure is higher than the 8.4% increase in the same period in 2024, it is still lower than the years before the Covid-19 pandemic (the corresponding levels in 2018 and 2019 were 10.1% and 12.2%). And as mentioned above, low consumption also affects the motivation for production and business.

Therefore, the fact that consumption has not been able to recover has inevitably made businesses worried. Mr. Phan Van Hieu, Chairman and General Director of CVI Pharma, shared that the disruption of the supply chain due to the trade war has increased input costs, and businesses have not been able to transfer costs to consumers, leading to reduced profits and reduced competitiveness. This year, the company does not expect high growth, 10% may be the target thanks to continued streamlining of personnel and cost control. From there, purchasing power may decline further due to the spillover effects of layoffs, reduced social income, and increased unemployment rates.

To stimulate consumption, tax reduction is an effective solution for people and businesses. Recently, the Ministry of Finance continued to propose reducing VAT with a wider range of subjects compared to Resolution No. 43/2022/QH15. The proposed tax reduction period is up to 18 months, from July 1, 2025 to December 31, 2026.

If passed, experts say this policy will continue to support businesses and people in reducing the cost of goods and services, thereby stimulating people's consumption, contributing to promoting business production, creating more jobs for workers and achieving the goal of stimulating consumption, promoting production, business and restoring socio-economic development.

Not only that, some experts believe that if domestic consumption is to increase, there must be a lack of money and capital, so the role of bank credit is very important. Mr. Pham Xuan Hoe, General Secretary of the Vietnam Financial Leasing Association, said that credit is an important channel to provide capital for the economy, but because "there is borrowing, there is repayment", it is only supportive. The main growth part still has to come from household spending in the economy, and if they want to spend, they must have money and high income. Therefore, we must further support production and business to create jobs. People are only willing to spend money if they know they can make money.

Restoring confidence and stimulating domestic consumption are among the solutions to promote growth.

Need to stabilize macro economy, support businesses

The good news is that domestic consumption has many factors to improve in the coming period. Analysts at Shinhan Securities Company predict that Vietnam's retail industry will continue to maintain a growth rate of 9-10% this year compared to 2024. Factors driving the development of this industry include expectations of positive economic growth, improved incomes of people and continued high urbanization rates. In addition, the growth momentum also comes from the development of consumer goods industries.

To stimulate domestic consumption, according to experts, the Government needs to continue to maintain macroeconomic stability and support businesses to improve productivity. At the same time, investing in logistics infrastructure and reducing transportation costs is also a key factor to improve the competitiveness of domestic goods in the market. Along with that, it is necessary to make good use of the momentum from the expanding middle class and catch up with new consumption trends. In addition to direct sales channels, e-commerce is also a solution that many experts recommend needs stronger support policies.

One of the factors that create a breakthrough in domestic consumption is the operational efficiency of enterprises, so Dr. Nguyen Huu Huan, Head of the Department of Finance - Ho Chi Minh City University of Economics, said that it is necessary to roll out the red carpet for domestic enterprises. Domestic enterprises must also continuously improve, adjust prices and seek new strategies to maintain market share. Brands need to balance price issues, improve customer experience and exploit the high-end consumer segment; invest in digital platforms, optimize customer journeys and build loyalty through seamless shopping experiences. At the same time, it is necessary to quickly adapt, optimize costs, diversify products and expand distribution channels to meet the increasing needs of Vietnamese consumers.

Source: https://thoibaonganhang.vn/tang-truong-kinh-te-can-tieu-dung-noi-dia-but-pha-162005.html