Financial sustainability and digital economy: New drivers for economic growth

Clarifying the economic situation

While many central banks across the world maintain tight monetary policies, the State Bank of Vietnam defies this trend and sets a variety of objectives ranging from inflation to currency rates and credit...

However, the economy's ongoing cash shortage has been a recurring challenge this year, with overall means of payment only increasing by roughly 5-6%. According to the theory that 5% economic growth plus 4% inflation necessitates a least 9-10% rise in overall means of payment.

The main culprit, in his opinion, is the one trillion Vietnamese dong earmarked from the state budget for public investment and budget plans that are not adequately infused into the economy. If this issue is properly solved, Vietnam's economy would surely exceed 5% growth, and firms will have far fewer challenges.

Vietnam's exports have showed a marked resurgence in the latter months of the year, particularly in the agricultural sector, with agricultural goods continuing to be heavily exported. This positive factor has contributed to Vietnam's overall balance of payments surplus, relieving the State Bank's pressure to regulate currency rates. However, our export efforts will confront significant hurdles in 2024 and beyond, such as carbon taxes, environmental problems, and product quality standards.

Looking at the chronology from the third and fourth quarters of 2022 and earlier, right after the Covid-19 epidemic, is a major topic. Every firm has been struggling. Despite the fact that the National Assembly Resolution defined a 350 trillion Vietnamese dong program for economic and social recovery and growth, policies like as tax reduction and land rent have been promptly implemented, but aid measures must be evaluated. Specifics on which enterprises have been sponsored and how much assistance persons in need get must be specified. Because overall retail sales of products have expanded extremely slowly this year after subtracting the price component, this immediately corresponds to our domestic consumption index.

In actuality, the prices of many necessary items have risen with modifications by state-managed goods, raising people's living expenditures. From the beginning of the year until today, we've witnessed a grim image of business, with numerous establishments on key streets shutting. To manage and suggest practical answers, I believe that thorough inquiry into the existing status of enterprises, as well as people's spending habits and lifestyles, is required to have a full picture from micro to macro, so that new solutions may enter everyday life.

Key drivers for growth

By the end of 2023, the government and ministries must audit and assess all initiatives aimed at assisting companies and the economy using real-world metrics.

Policy auditing is critical because when we quantify particular aims, the government will be more steadfast in guiding and motivating enterprises and individuals.

In terms of financial growth drivers for 2024, Mr. Hoe believes that: First, it must come from leading public investment because there is still a considerable quantity of unspent money. As a result, how public investment is distributed to enterprises has to be improved. Bidding regulations must be strengthened in this respect, with a focus on Vietnamese enterprises, particularly those that have implemented green standards, and ESG management should score better in bidding, guiding a more sustainable growth.

Second, it comes from FDI; we need to locate high-quality investment partners with sophisticated technologies who can help Vietnam's economy spread. Simultaneously, we must create sufficient internal capacity for domestic enterprises to satisfy criteria for technology, processes, and managerial skills capable of participating in the global value chain.

The third source of incentive is exports. If the EU, the US, or China can achieve a stronger growth momentum, foreign demand would surely rise. In addition, social welfare initiatives to encourage domestic demand might provide impetus for development in 2024.

Fourth, the flow of green financing, which several international institutions have committed to, represents a new financial approach. To attract this capital flow, Vietnam must develop central organizations with specialists analyzing capital-attraction initiatives.

A important fact is that, despite various shortcomings, Vietnam's digital economy has some strengths. Our system, on the other hand, has not actually fostered new inventive tales, such as assisting small enterprises in developing applications for more easy transactions and expanding their foreign market search. Green finance and the internet economy are two recent innovations that might boost Vietnam's economic growth in the next years.