Fiscal policy supports economic growth

Based on the Government’s proposal, the National Assembly has approved a resolution to reduce the value-added tax (VAT) rate by 2 per cent on certain goods and services, effective from July 1, 2025 until December 31, 2026.

According to calculations by the Ministry of Finance, this VAT reduction will decrease state budget revenue by more than 121 trillion VND. However, the lower VAT rate is expected to reduce prices of goods and services, stimulate consumer demand, and in turn boost business activity, thereby contributing back to the state budget and the wider economy.

A pillar role

Since the COVID - 19 pandemic, this is the fifth time the National Assembly has adopted a resolution to cut VAT from 10 per cent to 8 per cent on selected goods and services in order to support citizens and enterprises, thereby helping to stabilise the macroeconomy. Compared with previous reductions, this tax cut will last longer and expand coverage to include more essential goods and services for daily life as well as raw materials for production.

Continuing the expansionary fiscal policy pursued since the beginning of the current term, in 2025 fiscal tools are being deployed proactively, flexibly and effectively, forming the foundation for the dual goal of growth and macroeconomic stability. From the start of the year, the Ministry of Finance submitted a range of measures to the competent authorities, including support on land rent, taxes, fees and charges.

Fiscal measures such as tax exemptions, reductions and deferrals of land rent in recent years have not only eased cash flow pressure during difficult times but also strengthened public confidence in the National Assembly’s and Government’s commitment to accompanying citizens and enterprises.

Dr To Hoai Nam,
Standing Vice Chairman and Secretary-General of the Viet Nam Association of Small and Medium Enterprises

Moreover, deferrals of land rent, VAT, corporate income tax and personal income tax have acted as interest-free loans from the State, providing businesses with liquidity for investment in production and operations.

With the fiscal policies now in place, total support for citizens and enterprises in 2025 may exceed 230 trillion VND, around 35 trillion VND higher than in 2024.

Of particular note, another key fiscal measure in recent years has been public investment. In addition to nearly 830 trillion VND allocated from the state budget by the National Assembly, the 2025 public investment fund has been supplemented by revenue increases in 2024 and transfers from previous years, bringing the total to over 966 trillion VND, the highest level ever.

Under the Prime Minister’s directive, ministries, agencies and localities are striving to disburse 100 per cent of public investment capital in 2025, focusing heavily on major national projects that will provide a powerful engine for economic growth.

Close coordination with monetary policy

The current volatile and unpredictable global environment may affect external growth drivers such as foreign investment and trade, making it difficult to sustain strong momentum. In this context, fiscal and monetary policy play a particularly important role. Monetary policy injects capital into the economy quickly, supporting business activity, while fiscal policy, though operating with a certain time lag, encourages enterprises and consumers to expand production, operations and spending, thereby stimulating domestic demand and sustaining high growth.

To restore the economy to a high growth trajectory and lay the foundation for double-digit growth in the coming years, the Prime Minister has tasked the Ministry of Finance with continuing to implement an expansionary, well-targeted fiscal policy in close coordination with monetary policy to maintain macroeconomic stability.

Professor Dr To Trung Thanh, Head of Scientific Management at the National Economics University, observed that while both fiscal and monetary policies are being conducted in an expansionary manner, fiscal policy must take the lead in driving growth as the room for manoeuvre in monetary policy is narrowing.

Accordingly, it is essential to continue promoting counter-cyclical fiscal policy to boost aggregate demand and growth through increased public spending and tax cuts. In addition, the Government must remove institutional bottlenecks, accelerate public investment disbursement, improve the private investment environment, strengthen implementation capacity and make capital allocation processes more transparent.

Dr Can Van Luc, Chief Economist of the Bank for Investment and Development of Viet Nam (BIDV), stressed that balanced development of financial markets, including bonds, equities and investment funds, alongside determination to upgrade the stock market in September 2025, and a well-designed roadmap for adjusting state-administered prices of essential goods, are vital for improving the effectiveness of policy coordination between fiscal, monetary and other macroeconomic measures. At the same time, it is necessary to monitor risks in the financial and real estate systems, cyber security, and information and data safety, while pursuing specific measures to foster a healthier property market.

According to economic experts, the flexible and coordinated implementation of fiscal, monetary and other macroeconomic policies has proven effective in driving recovery and restoring high growth, particularly in the first half of 2025. However, going forward, measures are required to ease pressures on budget revenue and expenditure, imported inflation and rising input prices, as well as to mitigate risks in public investment and tighten fiscal discipline, thereby ensuring macroeconomic stability, controlling inflation and fostering sustainable economic development.

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