Make use of the most of favorable factors for economic growth

Dr. Nguyen Tu Anh

How do you assess the recovery momentum of important elements related to economic growth today?

Vietnam's economic growth depends on aggregate demand, including aggregate demand from consumption, investment, and export. Currently, total social investment, non-state sector investment, and foreign investment all increase higher than in 2023. In particular, investment from the state budget has increased by more than 20% over the same period last year, creating a driving force for investment in other regions. Public investment is expected to continue to have good disbursement momentum because many problems in large projects have been basically overcome and resolved such as the Long Thanh airport project, North-South expressway, and some other ring road projects in Hanoi and Ho Chi Minh City...

Private investment increased by more than 4% although it is not higher than the average level of nearly 9% in previous years and much higher than the 1.3% level in the first quarter of 2023. Foreign direct investment (FDI) also tends to increase rapidly, especially Vietnam is benefiting from shifting capital flows.

Along with factors from investment, our country's exports are also experiencing encouraging growth. Exports have had positive monthly growth over the same period since September 2023. By the end of the first quarter of 2024, exports have increased by 17% over the same period, so it is expected that exports for the whole year 2024 will increase 2-digit growth, reaching the set target. Thanks to positive investment and exports, it has created an element of expectation in the consumer market, thereby stimulating consumption activities. In addition, from the middle of this year, the new wage policy implemented will also support and boost consumption for the economy, promoting growth in the second quarter to the fourth quarter of 2024. At the same time, Vietnam's continued maintenance of an expansionary fiscal policy also boosts consumption.

Thus, the country's economy is being supported and has growth traction thanks to increased aggregate demand. Meanwhile, total supply is responding well, supply chains are not under much pressure, creating stability for the economy.

Regarding monetary policy, the executive agency, the State Bank, is quite "firm" in the relationship between interest rates and exchange rates. Maintaining interest rates at a low level must accept the exchange rate devaluation at a certain level. But the domestic foreign currency market is being supported thanks to high trade surplus, guaranteed market liquidity... so the benefits from interest rate reduction are greater than exchange rate reduction.

What are the hindering factors for economic growth, sir?

As I said above, private investment has not yet seen strong growth due to obstacles in access to capital. With credit, interest rates have now been reduced to low levels, so the barrier in accessing capital is the issue of collateral when 80% of collateral is real estate. Although the real estate market is no longer in a "frozen" state, it is still difficult to liquidate, making it difficult for businesses to access capital.

Furthermore, with large projects and large enterprises, medium and long-term capital is needed. This capital needs to come from the corporate bond market, but currently there has not been a breakthrough for businesses to conveniently access and take advantage of the possibilities and opportunities from the bond market.

Along with the above issues, the macro economy in general still faces risks from the world economy and uncertain issues related to geopolitics, which can cause supply chain disruptions. .

In your opinion, what is the solution to clear the above difficulties and problems?

In fact, management agencies have long identified the above problems and have come up with many solutions to solve them. For example, with the real estate market, the Land Law (amended), the Real Estate Business Law has been passed and in the near future there will be decrees and circulars to provide specific guidance and remove many difficulties. The corporate bond market after the "shocks" has also been reshaped, gradually strengthening confidence with investors and businesses, especially supporting the development of institutions and underwriting to help enterprises developing potential capital markets.

However, to completely resolve it, it takes a long time and requires a process to implement. Favorable factors are maximized, difficulties are limit ed and risks are strictly controlled, along with strong determination from the Government, with an expected economic growth target of 6-6.5% can be achieved, and even higher levels if the bottlenecks are completely resolved.