Public investment could pick up in 2H22

The public investment in 2Q22 jumped 10.0% yoy (52.6% qoq) to VND 116.1 trillion 

>> Public investment projects a burden for contractors

According to GSO, the public investment in 2Q22 jumped 10.0% yoy (52.6% qoq) to VND 116.1 trillion (versus an increase of 10.3% yoy seen in 1Q22). For 1H22, disbursed state capital rose 10.1% yoy to VND 192.2 trillion (below the 11.9% rate seen in 1H21), equivalent to 35.3% of the full-year target (that in the same period last year equivalent to 34.8% of the 2021 target).

Disbursement of public investment showed positive signals in the first half of this year. Public spending should be the driving force for economic recovery. The General Statistics Office estimated that if public investment increases by 1% YoY, GDP will inch up 0.058%. Therefore, the Government took more drastic and effective measures to speed up the disbursement of public spending and promptly handle bottlenecks, ensuring the disbursement rate reaches 100% under Dispatch 126 and Directive 01 dated February 8, 2022.

Besides, the State Treasury is also more flexible in controlling capital expenditure with two mechanisms: (1) Control first, disburse later; and (2) Disburse first, control later, and shorten the time for capital payment to speed up the disbursement for the economic rebound and avoid the end-of-the-year rush for disbursement.

Mr. Dinh Quang Hinh, analyst at VNDirect expects the implementation of public investment to accelerate in the coming months thanks to the last government’s efforts. Specifically, Prime Minister Pham Minh Chinh signed Decision No.548/QD-TTg on May 2, 2022 establishing six inspection teams to solve problems related to the disbursement of public investment. The inspection teams will work with ministries, central authorities and provinces on the disbursement rate of public investment capital below the national average. Then, they will report to the Prime Minister and propose specific solutions to accelerate public investment within 5 working days of the completion of the verification process.

>> Removing ostacles to expedite disbursement of public investment capital

In addition, the implementation of public investment could be supported by the recent decline of some construction materials such as iron and steel. Specifically, after peaking in April, domestic steel price has decreased by 11.7% compared to the end of the first quarter (-2.0% yoy) and is only about 2.7% higher than its level at the beginning of 2022. This factor will help improve profit margins for construction contractors, thereby speeding up the progress of public investment projects.

“For 2022F, we maintain our forecast that the implemented state capital to increase by 20-30% compared to the actual implementation in 2021, as GDP growth in the second half of 2022 could picks up from the low base of the same period in 2021. Noted that, public investment grew negatively in the last six months of 2021 due to the 4th wave of COVID-19 pandemic, social distancing, and rising construction material prices”, said Mr. Dinh Quang Hinh.