Efforts to maintain economic growth


The unforeseen development of COVID-19 epidemic will challenge the economic growth target of 6.8% this year. Recently, the Ministry of Planning and Investment had proposed two growth scenarios that were lower than the set target.

Covid-19 caused a negative impact in the tourism industry and aviation.

Covid-19 caused a negative impact in the tourism industry and aviation.

However, Prime Minister Nguyen Xuan Phuc affirmed that the growth target has not changed, but it is necessary to have a scenario based on the epidemic situation to proactively respond appropriately. Saigon Investment discussed this issue in an exchange with Dr. Tran Du Lich, member of Prime Minister's Economic Advisory Group.

JOURNALIST: - Sir, what do you think will be the impact of the COVID-19 epidemic on the economy?

Dr. TRẦN DU LỊCH: - The impact of COVID-19 on the economy will be huge, because it is really very serious. The spread of this disease has paralyzed all economic activities, not just a few sectors. Some industries are being directly and heavily affected such as the tourism industry, which then affects other related industries such as transportation and aviation. At the same time, Vietnam's exports to China, especially agricultural products, fruits and vegetables are also being greatly affected, because the main export market for Vietnam is China and we mainly export through border trade.

Another concern is that Vietnam's imports from China are mainly raw unfinished materials for products such as computers, electronics, components, phones, textiles, and plastic goods which account for 50-60% of imports. Accordingly, these industries are influenced by input from domestic production that includes exports.

In addition, the market structure and economy of Vietnam also has poor resilience to external impact. For example, Vietnamese businesses depend heavily on input and output of the Chinese market, and are slow in restructuring. Now, too much dependence on one market, plus the impact of the current epidemic this time clearly shows a flaw in “putting all eggs in one basket".

The effects are relatively clear now, and perhaps the economy will be affected for longer before the epidemic is contained. Even if the epidemic is resolved within the first quarter of the year or a little into the second quarter, the economic impact will be longer.

Therefore, in recent days, the Government has made great efforts in seeing all options and finding solutions in tackling them. First of all, we have to prioritize the issue of anti-epidemic. As the Prime Minister said, we must try to overcome the consequences and resolve economic difficulties. This means that people must try harder and harder to fight this strain of virus, and not just depend on the Government.

- The Ministry of Planning and Investment has set two growth scenarios for 2020. One is a 6.27% target if the epidemic is controlled in the first quarter and a 6.09% target if the epidemic is prolonged into the second quarter, but both scenarios lower the target of 6.8%. In a recent meeting, the Prime Minister confirmed that the growth target has not been changed. What are your views on this issue?

- I think The Ministry of Planning and Investment has researched all facts quite seriously. Collating this problem, we have to evaluate all outside impact, and the

This time we are been provided with an opportunity to see more clearly the consequences of dependence on one market. The recent approval of the European Parliament for EVFTA and EVIPA agreements will create trust and motivation for businesses and also a direction for businesses to restructure the market and find other avenues of growth.
resonant factors due to weak internal resistance of the structure, which will make a great impact. However, the Prime Minister's direction clearly sees that we do not discuss the adjustment of growth targets but discuss solutions to overcome difficulties in order to have the best economic growth. Because if we adjust the target, we will not make any effort to implement it.

Of course, because of the GDP related scenario, there are many other factors that need to be balanced in order to reduce as little as possible without adjusting growth targets. Vietnam's economy still has to strive for growth goals to resolve many budget, economic and social problems and other issues. In the solutions and directives mentioned above, I think that we need to broaden the impact now, not only on production but also on budget revenue.

- In the context of the epidemic, in your opinion, what are the necessary solutions to assist in solving difficulties for enterprises to maintain production as well as to promote economic growth?

- The Government has taken some measures, but I think it should focus on some things. The first is disbursement to promote public investment. Currently, public investment in projects is not disbursed and implemented. On this occasion, we must make efforts to solve this capital issue.

The second is to expand private investment. Currently, many private investment projects cannot be implemented, in particular hundreds of thousands of real estate projects and many other fields are held up due to many bottlenecks. When this source of capital is opened, it will stimulate growth.

Thirdly, businesses are self-seeking and are worried while handling sources to deal with raw materials and markets. But the State should have financial solutions to support them. For example, it is possible to postpone debts and taxes for some businesses, but we have to choose the real influential ones, not spread out randomly to distort the market.

Regarding monetary measures, we should try to loosen credit, open credit a little more and not worry about inflation much. I think inflation can be controlled, if not at 4%, at 5%, it will be acceptable to spread credit. At the same time, the State Bank of Vietnam must also use other measures to reduce interest rates.

- Thank you very much.

Translated by Kristine 

Yen Lam (Interviewer)

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