The problem of the economy lies in aggregate demand.

Mr. Le Duy Binh - Executive Director of Economica Vietnam in the interview with Journalist & Public Opinion below stated the above point of view.

More than 1km of highway is built every day.

+ From the perspective of an expert and also the CEO of Economica Vietnam, what is the true picture of the current economic situation and the challenges the economy is facing?

- The Vietnamese economy has gone through 6 months full of difficulties and challenges but has also seen positive signs. In the first 6 months of the year, the production and supply capacity of the economy has been maintained. On the basis of a stable macro-economy, the number of newly registered and re-operated enterprises has begun to increase again. Total social investment continues to increase. Public investment is being promoted. Infrastructure capacity is still being focused on improving. The speed of infrastructure construction is being accelerated with an average speed of more than 1km of highway being built each day. Improved infrastructure has significantly improved the production capacity of the economy.

The problem of the emerging economy in the aggregate 1 — Economist Le Duy Binh - CEO of Economyca Vietnam. Photo: HL

From the perspective of aggregate demand, domestic consumption, with important indicators being total retail sales and revenue from consumer goods and services, continued to increase. Government spending increased with about VND 226 trillion of public investment disbursed. Investment by enterprises, including domestic enterprises and foreign investment, began to increase again and showed more positive signs of growth in the coming quarters.

However, the decline in imports and exports is the main cause of the decline in aggregate demand, which is the biggest obstacle causing GDP growth to reach a much lower rate than the target set by the National Assembly and the Government and at the level desired by businesses and people.

Besides, we see that the economy still has many challenges for the short-term goals of the economy but also shows many challenges for the medium-term goals and needs to have solutions soon to overcome.

+ What is the challenge you are facing now?

- The current problem of the economy seems to lie in aggregate demand. The Vietnamese economy seems to be more vulnerable to the global economic downturn than many other economies in the region. Exports are Vietnam's strength but also its vulnerability when global market conditions become unfavorable. Vietnam's exports in the first 6 months of the year decreased by 12.1%, a deeper decline than some countries in ASEAN (Thailand's decline was 5.1%, Indonesia's was 6%, Malaysia's was 2.3%).

This suggests the need to raise serious questions about the structure of aggregate demand in the Vietnamese economy.

Demand from export markets has been and will always be an important driving force, at least in the immediate future, but the growth rate of export turnover always being 1.5 or even 2 times higher than domestic consumption will make the economy increasingly dependent on the global market, making the economy very vulnerable when the world market has major fluctuations.

The structure of aggregate demand in the economy is a question not only for the last 6 months of 2023 but also for the coming years. To maintain growth from now until the end of the year, and then, to regain growth momentum, we must stimulate aggregate demand.

We have issued policies, implemented solutions to stimulate demand, stimulate consumption, restore tourism, and increase public investment. The promoted public-private partnership has been and continues to be an important driving force. However, from the perspective of aggregate demand, we clearly cannot and should not expect government spending to continue to be as high as in 2023. Excessive government spending will lead to risks of public debt and the crowding out of private investment.

From the current state of the economy and the challenges we have seen and forecasted, it can be seen that the important requirement for the economy is to restructure the total demand of the economy and from there there are signs for restructuring production and business activities.

The sluggish real estate market has caused a decline in aggregate demand.

+ In what direction do you think aggregate demand should be restructured?

- When government spending and total public investment are no longer maintained at high levels and export growth slows down, domestic consumption needs to increase to take its place.

Investment activities of enterprises and households also need to be increased and promoted, in line with the new structure of the economy. This can help the economy have a more sustainable aggregate demand structure, thereby contributing to the autonomy and self-reliance of the economy.

Vietnam's population has officially surpassed 100 million people. We are happy to welcome the 100 millionth citizen, and foreign consumer groups are also happy to welcome the 100 millionth consumer in the Vietnamese market. This confirms the increasingly important role of the domestic market and the demand for domestic goods and services.

The problem of the developing economy in the aggregate 2 — Real estate in Ho Chi Minh City. Photo: Nhu Quynh.

Besides, the sluggish real estate market is also an important cause of the decline in aggregate demand and directly affects GDP growth.

+ So, according to you, one of the ways to increase aggregate demand and promote growth is the real estate market. But which segment should we focus on?

- From a growth perspective, in fact, the real estate industry, specifically the housing, rental housing and housing services segments, is a very significant component of domestic consumption and total demand.

The demand potential for this segment is real and large-scale. However, it has not been realized to contribute to the total demand of the economy in 2023 because the supply is very scarce. Meanwhile, the supply of high-end real estate or resort products is in excess. This phase difference causes the economy to miss out on meeting a real demand, thereby missing a significant opportunity to contribute percentage points to growth.

Thus, sustainable development of the housing market, rental housing and housing services needs to be affirmed more clearly due to its significance in contributing to the total demand of the economy not only in the short term but also in the medium and long term.

+ Many forecasts say that the third and fourth quarters will still be very difficult and it will be difficult to achieve the growth target. So what do you see about Vietnam's economic prospects?

- The current economic difficulties are very challenging but can be overcome. If the growth rate only reaches the low scenario, it is not too bad in the context of the general decline of the global economy. The current difficulties and challenges are also an opportunity for the economy to re-evaluate and adjust to have stronger competitiveness, towards the goal of self-reliance, self-reliance, and greater resilience.

In my opinion, the medium-term economic outlook of the economy is positive, and domestic investors' confidence will continue to be strengthened by efforts to improve the investment environment, institutional reform, and enhance the quality of public governance...

+ Thank you.

Ha Linh (Implementation)

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