Risk factors on economic recovery momentum

The Economic Recovery and Development Program for 2022-2023 needs focus on injecting capital for businesses and projects that can be quickly executed and attract labors. Photo: Internet.

Two major problems

Assessing difficulties and instability in economic recovery, Dr. Vo Tri Thanh, Director of the Institute for Brand and Competitiveness Strategy, said Vietnam has been deeply affected by the Covid-19 pandemic, causing low growth.

However, since the Government issued Resolution 128/NQ-CP on safe and flexible adaption to and effective control of the COVID-19 pandemic in October 2021, the economy has recovered. GDP growth in the fourth quarter of 2021 hit 5.22%. The domestic economic recovery momentum is expected to be maintained in the first quarter of 2022.

However, Vietnam’s economic recovery is facing two problems. The first is that growth is slowing down. Earlier, the International Monetary Fund (IMF) forecasted the global economic growth in 2022 to reach 4.9% but in January 2022, the fund provided the expected figure of 4.4% and would see a decrease in April.

The decline is predicted before the conflict between Russia and Ukraine. The situation results from the high-growth rate of the economic recovery in 2021 and the adjustment of monetary policy and tightening of support packages by developed countries such as the US, affecting the economic recovery.

Meanwhile, the conflict not only has a heavy impact on the economies of these two countries but also affects the world economy. Accordingly, it will lead to disruptions of the supply chain, causing a sharp increase in prices and putting pressure on inflation.

The second is the risk of macroeconomic instability, especially inflation, in 2021.

Many new factors affecting the economy have taken place compared to the promulgation time of the Economic Recovery and Development Program for 2022-2023 such as the Russia-Ukraine conflict, prices of gasoline and fuel, sanctions between Russia and the West.

Although the program supports health, social security, employment, businesses, labor, cooperatives, households, it may bring risks such as inflation, budget deficit, public debt or businesses may transfer support payments into financial investment channels.

According to Dr. Vo Tri Thanh, if we effectively execute the Program, Vietnam's growth in 2022 may still decrease compared to the forecast in the early year, and inflation is difficult to control at less than 4% as required.

Expediting support for businesses

Economic experts said that the execution of the program becomes more important and it is necessary to implement solutions to harmonize monetary policy. The quick implementation of the program and support packages also helps businesses access the packages in an effective manner.

According to Director of the Department of Enterprise Development (Ministry of Planning and Investment) Le Manh Hung, compliance of policy plays a key role, because when the policy is accurate but the implementation is not effective, this will directly affect beneficiaries and the economy.

“During the recent implementation, agencies have partially digitized procedures, which will help expedite the enforcement of policies. In addition, some policies have removed the pre-audit stage and then the post-inspection will be performed. We think this should be done in the near future. The active coordination of local authorities is also needed,” Director Le Manh Hung said.

According to Dr. Vo Tri Thanh, to achieve the highest effectiveness, the policies need to be built to improve their effectiveness and efficiency, and the policy-making process needs to be expedited.

Accordingly, the policy-making process in the current context needs an extraordinary process to respond to an unusual context.

"Recently, the National Assembly has coordinated and accompanied the Government, this is unprecedented. After the Government issued the Resolution, ministries and government agencies such as the State Bank, the Ministry of Labour, Invalids and Social Affairs, the Ministry of Agriculture and Rural Development, also developed the legal framework to implement in March. However, the process is still developed in a traditional way and needs to be expedited. The policy must be made in a simple and clear manner to easily implement and prevent loopholes," said Mr. Thanh.

Dr. Can Van Luc said that the efficiency of policy coordination, especially between fiscal policy, monetary policy and other macro policies, thereby, balancing money supply, controlling interest rate level and inflation, contributes to macroeconomic stability.

Luc also expects that in 2022, the world and Vietnam's economies will see positive recovery with the world's growth rate estimated at 4.5-5% and the country’s growth rate maybe around 6.5% -7%.