Experts suggest policies to stimulate aggregate demand in HCM City

HCM City aims to achieve gross regional domestic product (GRDP) growth of 7.5-8 per cent in 2024 by focusing on boosting aggregate demand and expanding export markets. VNA/VNS Photo

HCM CITY – Experts gave recommendations for HCM City to restore aggregate demand and promote growth in the new context of this year.

HCM City can achieve its 2024 gross regional domestic product (GRDP) growth target of 7.5-8 per cent by focusing on boosting aggregate demand and expanding export markets, according to a new study.

The study published on Thursday (January 5) named "Macroeconomic Report: 2023 Results and 2024 Forecast" was conducted by the Statistics Office of HCM City and the University of Economics of HCM City (UEH).

Dr. Hồ Hoàng Anh, from the HCM City University of Economics, a representative of the research team, said that the city's GRDP is gradually approaching potential GRDP. This achievement also proves the city's economy is recovering steadily after recent difficult times.

In 2023, the city’s GRDP grew 5.8 per cent, lower than the year’s target by 1.7-2 percentage points.

As a major economic hub of the country, the city's economy always achieves growth rates higher than the national average and creates jobs for millions of workers from all provinces and cities. Some indicators can indirectly show the recovery speed of aggregate demand in the city, such as total retail sales of goods and consumer service revenue, along with transportation and warehousing revenue.

Last month, the city set the target growth at 7.5-8 per cent for this year, which is only possible if the global economic recovery speeds up and the city simultaneously implements multiple policies to boost aggregate demand, experts from UEH said.

Aggregate demand is the total value of goods and services produced and consumed in an economy during a specific period.

By analysing 2023 quarterly performance indicators, especially consumer spending, exports and imports, the research team assessed that HCM City’s economy had been steadily recovering.

However, the global outlook is not so positive, as most reputable research institutes speculate that global economic recovery will continue to be sluggish in 2024 with very slim chances for a breakthrough due to global supply chain disruption resulting from political conflicts.

The International Monetary Fund (IMF) has forecast Việt Nam's GDP growth in 2024 at 5.8 per cent, which is a high growth rate compared to other countries in the region. Meanwhile, the Vietnamese Government targets GDP growth in 2024 at 6-6.5 per cent.

The likelihood of American and European banks lowering their interest rates in 2024, especially in the first half, is low.

Foreign trade with the US and Europe, the city’s biggest partners, is expected to increase modestly this year while trade with China might even decrease, resulting in more challenges for the city’s exports, the study said.

Experts say that some important policies that HCM City's government needs to pay more attention to are supporting and encouraging the city's business community to find partners and expand export markets to countries other than China and the US.

At the same time, diversifying export markets will help the City's export sector minimise cyclicality and grow more stably.

To boost demand, the research team suggested the city issue policies to promote consumer spending, business and household investments, and exports.

Specifically, the city authority needs to expand exports to markets such as Japan and South Korea.

India, accounting for just 1.41 per cent of the City’s exports last year, is also a potentially lucrative market to expand to as its economy is growing steadily.

These policies, combined with solutions to expedite public investment disbursement, resolve bad debts, increase the banking system’s liquidity and improve credit access, will speed up the city’s economic recovery in the second half of 2024, UEH experts said.

Businesses are also optimistic about this year, as 66.7 per cent of state enterprises, 65.3 per cent of private firms and 65.2 per cent of foreign companies have posted positive 2024 forecasts.

In addition, the city should continue to reform its administrative management apparatus in the direction of streamlining procedures to minimise time and costs for people and businesses in registering investment, production and business, especially in the construction and real estate sectors.

In short term, HCM City can research, classify and rank real estate projects in order of priority and focus resources on projects with the most potential to create the greatest impact in the future.