Dr. Can Van Luc: Don’t worry much about inflation in 2024

Dr. Can Van Luc

How do you comment on the economic picture in 2024?

According to the latest announced forecast of the World Bank (WB), GDP in 2023 only reached 2.6% (lower than 3% in 2022) and is projected to slow down with an increase of 2.4% in 2024. In addition, the US and China are predicted to grow slowly. However, inflation (CPI) decreased from a peak of 8.6% in 2022 to 5% at the end of 2023 and 3.9% at the end of 2024.

In 2024, geopolitical conflicts and strategic competition among major countries will tend to be more complicated and prolonged. Along with that, a number of potential risks such as: the failure of a number of banks in the US and Switzerland; public and private debt increases; Global financial and currency market risks, bad debt and default risks. Moreover, energy security and food security risks still exist, while global prices, inflation, and interest rates have decreased but remained at high levels. Financial and monetary risks hinder the global economic recovery process and negatively impact Vietnam's exports, investment, consumption, international tourism and financial market.

How do you assess inflation concerns and what factor will be the growth drivers in 2024?

Despite the global economic chaos, Vietnam growth is likely to be more thriving, with more optimism, especially since inflation is now under control. Accordingly, Vietnam can take advantage of stimulating growth but not worry too much about inflation, which can be well controlled under the set target if pressures from two main groups of goods and services including food and housing, construction materials are under control.

In addition, in terms of institutions, new laws that have been passed and will be passed such as the Land Law, the Credit Institutions Law, the Real Estate Business Law, the Housing Law, the Price Law, and the Electricity Transaction Law. electronic... will consolidate a foundation for markets (related to land, real estate construction, banking and finance...) to develop safer and healthier in the coming time.

In addition, a number of policy mechanisms issued in 2023 are legal framework to support businesses and people, including fiscal and monetary policies. The Government and National Assembly have agreed to continue reducing VAT taxes and environmental protection tax and a number of other taxes and fees to a level nearly equivalent to 2023.

In particular, I completely agree with the newly issued Resolution 01 on the 2024 Socio-Economic Development Plan, considering 2024 as a year of acceleration and breakthrough to achieve the plan for the entire period 2021- 2025, with the view of "refreshing" old growth drivers and effectively implementing new growth drivers.

Accordingly, it is necessary to "click" on two key points today: consumption and private investment. Therefore, the Government should maintain policy mechanisms to support businesses and people at least at a level equivalent to the Covid-19 pandemic period; At the same time, we must regain the trust of the business community through strongly improving the institutions and business investment environment.

In 2024, Vietnam can "stimulate" private consumption and investment without worrying too much about inflation. Inflation can be well controlled according to the set target by restraining price increases in food, housing prices and construction materials - two groups that cause more than 70% of inflation in 2023.

In particular, to stimulate investment it is necessary to focus on three key economic areas with a very large level of regional linkage spillover: Hanoi, Da Nang and Ho Chi Minh City. Notably, the GRDP growth recorded in these cities were very low (Da Nang was 3.26% - nearly the lowest in the country; Ho Chi Minh City was only 5.81% and Hanoi was over 6%), while the reasonable growth rate of these three locomotives must 1.3-1.5 times higher than that of the whole country.

Regarding new growth drivers, Viet Nam can benefit from digital transformation and science and technology, boosting labor productivity, institutional reform or green growth and proactive adaptation to climate change strategies...., Vietnam currently has a lot of room to take advantage of such new motivation. Last year, digital transformation was quite strong, but labor productivity growth was still low - only 3.65%.

Basing on current difficulties and advantages for the Vietnamese economy, to create growth momentum for 2024, what solutions needed to implement synchronously?

To create growth momentum for 2024, it is high time to consolidate and renew existing growth drivers, focus on restructuring the economy after a long period of stagnation due to the pandemic and delays in dealing with weak businesses and projects. More importantly, it is necessary to promote and exploit new growth drivers, with the emphasis being on accelerating the process of perfecting institutions, especially guiding the implementation of land, housing, real estate business, credit institutions, other amended laws, support mechanisms in the context of applying global minimum tax...

Accordingly, it is necessary to soon issue a legal framework for new economic models, new faster business, and a sandbox pilot mechanism. In order to develop science technology, testing mechanism is crucial to implement new things, new models.

Besides, agencies in charge soon build a project to improve national labor productivity; Strengthen the training of high-quality human resources, create a more open environment to promote innovation, and establish a National Productivity Committee to have clear guidance and policy mechanisms for implementation.

Especially, the Government should promote green growth; Fully and promptly issue documents guiding the implementation of the Law on Environmental Protection 2020; Map out specific plans to respond to climate change; Implement the Green Growth Strategy, Circular Economy Development Project, "Zero - carbon" commitment by 2050...

In addition, the building, managing and exploiting the national information and data base in each field, industry, locality, organization, and enterprise must be paid more attention along with interconnection, sharing and data risk management... Regarding monetary policy, we need to try to maintain low interest rates to support the economy to facilitate businesses and people and motivate more investment for development.

Thank you very much!