Make efforts to expand fiscal and monetary policy to support enterprises in resolving difficulties

Associate Professor Dr. Pham The Anh shares information about economic growth.

Growth slows down and fluctuates in the short term

Associate Professor Dr. Pham The Anh, Head of Department of Economics of the National Economics University cum Chief Economist of VESS, said that after the Covid-19 pandemic, the world economy continues to face difficulties on the road to recovery. The world economic growth slows down while inflation, interest rates and financial risks show signs of increasing.

Vietnam has also been affected by the world's economic decline. The slowdown in international trade and investment flows has had impact on Vietnam's economy, despite the advantages brought by free trade agreements and the shift in global investment capital flows.

Accordingly, although the economic growth rate in the first nine months of 2023 increases slightly over the quarters, it is still lower than the average rate before the pandemic; all three components of aggregate demand are weak; businesses' capital access channels face difficulties; overall inflation decreases in the first half of the year but tends to resume increase in the third quarter. At the same time, core inflation still rises while new price increase risks occur.

“Although the Government's great efforts in expanding fiscal and monetary policy have supported businesses and people in overcoming difficulties, it can not ensure the sustained recovery of the economy,” Associate Professor. Dr. Pham The Anh said.

He also said that the Vietnam's economic growth in the first nine months of 2023 slowed down and fluctuated in short term. The GDP only reached only 4.2%. The industrial production has dropped, especially, the decrease in output, orders, and production costs.

According to VESS experts, consumption growth has slowed down over the quarters. Basically, domestic purchasing power is still weak due to low income, declined assets and cautious psychology.

“In the first 11 months of the year, the public investment recorded positive result. However, the State investment only reached 75% of the plan due to the lack of motivation, legal problems and the increase in raw material prices. Meanwhile, private investment continues to stagnate due to slow decline in loan interest rates, difficulty in accessing credit and issuing bonds and stocks, especially the output of businesses faces many difficulties, and confidence shakes” Associate Professor, Dr. Pham The Anh said.

Assessing the economy in 2023, he said that economic growth recovers slightly over the quarters but at a lower level than the normal level and the target: Domestic consumption growth weakens; public investment leads aggregate demand, and private investment stagnates.

Speaking about the economic outlook, he said that the recovery of the domestic economy is associated with the world economy. In the coming time, credit demand for production will fall until exports recover; current credit will mainly serve to roll over debt in the real estate sector; the economy will face difficult, the real estate market will freeze, and bad debt will surge.

In the long term, the economy continues to depend on the credit channel, as the bond market takes a long time to recover. Meanwhile, deposit interest rates are at the bottom

The special consumption tax on cigarettes needs to be increased

At the, Associate Professor Dr. Vu Sy Cuong, Public Finance expert, Academy of Finance proposed to implement solution groups to reform the tax system to match international practices.

The expert suggested applying one VAT rate, developing a roadmap to revise up tax rate for products such as alcohol, beer, and cigarettes; increasing revenue for land and collecting additional revenue for houses; expanding subjects subject to environmental protection tax for goods that cause environmental pollution...

For the solution group on policy implementation, expert Vu Sy Cuong emphasized solutions to reform tax administrative procedures and expand the application of digital technology to the tax industry.

At the session, the representative of HealthBridge Canada to Vietnam said that although many remarkable results have been achieved in reducing the rate of tobacco use among adolescents, the prevention of harmful effects of tobacco in Vietnam still faces many challenges.

One of the main reasons for the smoking rate in Vietnam is still high and decreases slowly because the cigarette price is still low and even cheaper compared to the income.

The tax rate on cigarette retail prices in Vietnam only accounts for 38.8% (2020), lower than the average of middle-income countries (59%), lower than most countries in the ASEAN region, and far from the WHO recommendation of 70% of retail price (WHO 2020).

In addition, electronic cigarettes and heated cigarettes are toxic products that tend to target mainly young people, with the risk of affecting an entire generation of young people. Meanwhile, there are currently no specific legal regulations to prevent these products.

To reduce the number of tobacco users, one of the policy recommendations mentioned by the HealthBridge Canada representative to Vietnam is the need to sharply increase the special consumption tax on cigarettes to prevent the increase in cigarette purchasing power and limit   young people's access to cheap cigarettes.