Vietnam is on good momentum, good position

The world economy in 2024 is forecasted to be uncertain. Difficulties and challenges are still looming ahead, posing a significant threat to an open economy like Vietnam.

Looking back at what has been experienced in the historically difficult year of 2023, Associate Professor, Dr. Tran Dinh Thien, former Director of the Vietnam Economic Institute, still believes that Vietnam will continue to promote its ability to adapt well to seize valuable opportunities, turning challenges into opportunities to revive the economy.

*2023 is called a year of historical difficulty - after nearly 4 years of facing epidemics, conflicts, inflation, supply chain disruptions... History also means that it is behind us, that the difficulties have passed, can we understand that, sir?

-Assoc. Prof. Dr. Tran Dinh Thien: I think that the world economy from now until 2024 is still uncertain and extremely unpredictable. There are factors that have improved but there are also signs of deterioration and abnormality. This is a general trend not only for this year but also for the medium term. The world is in a lost decade, facing "headwinds" - as the World Bank and many economic organizations have assessed. In 2022, the economy will face three headwinds, which are high inflation, worsening financial conditions (high interest rates) and serious problems with the Chinese economy. At that time, the Russia-Ukraine war also contributed to the decline. By 2023, when China lifted the embargo, we thought that this country would overcome the downward trend and recover, but in reality, this did not happen. Therefore, I assess that up to now, these three headwinds still exist. Not to mention that US inflation and interest rates are still showing signs of continuing to rise. This is even more dangerous than the current decline of the Chinese economy.

As an economy with a large openness, although we have created good momentum with a few bright spots throughout the 2022 period, Vietnam's economic strength is not strong yet, so the deteriorating signs of the world economy will have a huge impact on Vietnam.

However, no economy has only negative impacts. It is also because it is an open economy that opportunities also appear in the storm. For example, changes in energy prices can be disadvantageous but also beneficial for Vietnam. The Ukraine-Russia conflict and climate change also have extremely strong impacts on the global food story. In a broad sense, the food crisis is also a disaster. However, in such a context, Vietnamese agriculture can become a support, supporting the world to escape from difficulties, at the same time we also benefit; or we also have many opportunities when the world's capital flows shift.

Prime Minister Pham Minh Chinh inspects the An Huu - Cao Lanh expressway project, phase 1, through Dong Thap province.

TRAN NGOC

We should not expect to overcome difficulties without damage. There will be much pain, many businesses will not survive and will have to go. The slower it is, the higher the number will be. That is why the Government must act urgently because it does not want to lose more, does not want to have more difficulties, does not want to pay a higher price.

*What basis gives you such belief?

-First, Vietnam possesses the capacity to immediately meet practical requirements, typically agriculture. Vietnam's agriculture has advantages that few countries have. We have natural conditions, geography and production capacity that are strong enough to compete with other agricultural countries. Thanks to that, Vietnam not only does not have to resonate with the world's "disasters" but can still increase exports. This is an advantage that can be promoted.

Second is the capacity of the business community. In general, Vietnamese businesses are still small. Small is of course weak, but has the advantage of being able to respond very quickly. This has been clearly demonstrated during the past 4 years of facing unprecedented crises in history. This will be the time for businesses to fully exploit that advantage of responding, not only to seize the opportunity to benefit but also to grow, access new markets, and gain trust with the world.

Third, Vietnam is in good shape. We are attracting a lot of foreign investment. Why do they come to Vietnam? They do not just come to sell products in Vietnam, but because we have advantages to help them meet the demands of the world. In the difficult global economic context, they are looking for opportunities, and at the same time, they are creating opportunities for us.

These are extremely valuable opportunities, not to mention that if the Government's management policies and actions are as fast and strong as they have been since the beginning of the year, the economy's ability to take advantage of opportunities will be even better.

Associate Professor, Dr. Tran Dinh Thien, former Director of Vietnam Economic Institute

NGOC THANG

*Can you analyze in more detail the "fast" and "strong" factors in policy management that you just identified?

-Looking back, the Vietnamese economy in 2022 created miracles but at the same time also showed unusual things. The miracle is that while the world's growth is low, Vietnam still recorded high growth. What is unusual is that growth is high but inflation is low. This goes against the basic principles of economics. Without money being pumped out and without inflation for many years, where does growth come from?

Since the end of last year, the Government has begun to recognize that Vietnam's economic structure is having problems and has proposed a series of urgent solutions. The most prominent is the continuous reduction of interest rates. We have never witnessed 4 consecutive interest rate reductions despite the huge pressure of bad debt. At the same time, we are promoting public investment. Although the disbursement progress has not been as expected, the drastic approach clearly demonstrates the effort to create more channels to pump capital into the economy. Up to now, the disbursement rate of public investment capital has increased compared to the same period last year and creates confidence that from now until the end of the year, this source of capital will be effective.

In addition, the way the corporate bond issue was handled is also noteworthy. The initial incidents caused "shock" in operations, leading to some operations that caused the market to slow down. Decree 65 had just been issued and put into testing, but when it was found to be unstable, Decree 08 was immediately issued to replace and amend it. Through that, we witnessed the Government's receptive spirit, not afraid to correct mistakes, ready to change quickly to save businesses. Along with that is the request for the Ministry of Finance to reduce taxes, defer taxes, refund taxes...

The directives are implemented on all fronts. Policy actions have many breakthroughs and are motivated not only by budget benefits but also by the paramount importance of getting the economy out of danger and reviving the indigenous areas. The change from awareness to action has created confidence for businesses and the economy.

*But clearly the business sector is still facing many difficulties…, how do you explain this paradox?

- Of course, policies cannot be implemented immediately after they are issued. The process of implementing policies in Vietnam is often very long, slow, entangled, and even conflicting... From the perspective of policy making, it is very good, but it leads to delays in practice and errors in implementation. That is the problem that needs to be resolutely resolved. If patients are left to wait past the "golden hour", they will not be able to recover. Currently, many Vietnamese enterprises are in the stage of approaching the "golden hour", especially in the real estate sector. The difficulty is not only capital sources but also the market. In the first stage, we focus on releasing capital for enterprises, most of the measures focus on input. But the basic principle of the economy is "connection". Good input but bad output is also "dead". Now no one dares to borrow, banks do not want to lend because there is no prospect of market output. If we do not pay attention to total demand, do not discuss the chain, including calculating the market to the last stage, then it will certainly be blocked.

The current approach of Vietnam, both the State and enterprises are following the direction of knowing where the pain is, and having to bear the pain wherever it is, while the economy operates in a way that the mind cannot work when the foot hurts. It is a system of interconnected meridians and cannot be allowed to be blocked at any stage. It is not allowed to neglect the principle of the market economy , which is to clear all the routes of movement of resources, including input and output. Output is also a resource. If you cannot sell products, where will the resources come from? This is a profound lesson for management.

Rice exported at Tan Cang

GIA HAN

-12 component projects of the North-South Expressway, Long Thanh airport terminal, T3 terminal, Tan Son Nhat airport..., from the beginning of 2023 until now, a series of key infrastructure projects have been started. Do you think that the acceleration of public investment can become a driving force for capital flow as well as stimulate aggregate demand for the economy in the last quarter of the year as well as the coming years?

*It is true that public investment programs have never been as strong and created momentum as they are now. The Prime Minister has supervised almost all projects, creating great confidence, especially in the Western region and the South Central Coast - where the North-South Expressway runs through. People are very excited and expectant. This is a very good direction, opening up the economy by opening up the currency. The initial results are quite positive. In the past eight months, public investment disbursement has reached nearly 50%, much higher than the same period last year.

Manufactured at Vien Thinh Shoe Company Limited (Long Hau Industrial Park, Can Giuoc District, Long An)

JADE PEACH

However, there are still 4 months left to disburse nearly 2/3 of the remaining capital, this is a big pressure. I still return to the "clear" principle. "Clear" means everything can be resolved. Vietnam's investment is stuck at the money stage. "Locking" money in the treasury, in the bank makes it very difficult to disburse. The project approval process, site clearance process, and residential agreements take a lot of time. That part is under great pressure because when we push infrastructure projects simultaneously across the country without resolving other bottlenecks, it will be blocked immediately. The most prominent problem right now is the scarcity of construction materials. If prices cannot be negotiated, projects will stagnate. Many contractors are living a half-dead life.

We must pay close attention to the issue of synchronization. If one thing increases rapidly while the other is slow as a turtle, it is not acceptable. Without synchronization, the blockages will cause the battle to break down. Do not think that the economic "body" only suffers economic blows. The sensitive economic sector is affected by many other external factors such as complicated administrative procedures, complications, delays, moving from one place to another... then the economy is "dead".

*According to you, what will be the driving force for Vietnam's economy to recover and grow in 2024?

-Talking about motivation, first of all, it must be dynamic force. We say that capital is the motivation, public investment is the motivation, but if the blockages are not cleared, not synchronized, and left "blocked", then the motivation will also become static force. Therefore, I think that the concept of "clear" is the essence of motivation. We point out the static and blocked meridians, review and clear them, then those are the motivations. A cleared meridian system will help the whole body move.

Economic difficulties, the budget needs to pump money out

In difficult times, the principle of countercyclical budget investment must be respected. When the economy is strong and abundant, without needing too much support from the budget, the State can just collect and reserve, without needing to invest much because at that time the motivation for enterprises to invest is very good, just let the market do it. However, when the market economy is difficult, resources begin to slow down and weaken, then the budget must support, must pump money out. Of course, the budget must be calculated in balance but must be in the spirit of accepting losses, making sacrifices to stimulate the economy. This is a vital benefit, a spirit of symbiosis and mutual death. Trying to maintain the budget in the short term but leaving long-term consequences for the operation of the economy. Right now we are only in a difficult situation, not a tragedy, so the cost to revive is not too high. If we do not act quickly, the more "severe patients" there are, the more expensive the "treatment" will be.

Supporting people is also saving businesses

To solve the output problem, we must not only discuss capital but also consider the price mechanism. Assuming that for industries that are already in a market price mechanism, we must discuss stimulating aggregate demand. It is as simple as stimulating consumption by establishing consumer loan guarantee funds; economic recovery programs must further promote disbursement, even "pumping" the budget out to pay cash to workers and low-income people. During this period, businesses are facing difficulties, many workers quit and lose their jobs, supporting them with cash so that they have the conditions to spend is not only "saving" them but also "saving" both businesses and the whole economy. When people benefit, businesses also benefit. Only then can the economy recover. That is called aggregate demand.

Then the tax policy must be reduced more strongly. If it can be reduced to 5%, is that okay? If it can be refunded to value added tax, why not refund it to businesses? This is also the time to set up loan guarantee funds to support banks. Promising businesses will have more resources to support their projects until they reach the market. It is necessary to support real interest rate reduction for businesses aiming at future markets. Businesses and projects aiming at developing green products, needing urgent conditions to meet international standards, must also be "rescued" with preferential loans. This is not only to help the bosses but also to save workers and the country's position.

Thanhnien.vn