Vietnam's economy: Flexible and reasonable fiscal policy

Fiscal policy remains a cornerstone for sustaining macroeconomic stability, promoting growth, and ensuring sustainable development.

As Vietnam's economy is recovering from the COVID-19 pandemic but still faces many big challenges, the Ministry of Finance (MoF) has introduced a range of measures aimed at revitalising economic activity and mitigating the impact of global uncertainties.

In recent years, the ministry has proactively devised and implemented an expansive and flexible fiscal policy to support businesses and foster sustainable development. These efforts have been instrumental in stabilising the economy during challenging times.

According to Deputy Prime Minister Ho Duc Phuoc, fiscal policies are tightening globally with many countries increasing tax rates to strengthen public finances. However, Vietnam has maintained an expansive fiscal policy to facilitate enterprise growth.

He underscored the importance of aligning fiscal and monetary policies as dual drivers of economic development, with both policies operating in a coordinated and timely manner.

Also in the Resolution of the Government's November meeting, the Government requested continuing the reasonably expansive fiscal policy, in coordination with other macroeconomic policies, to promote rapid recovery of production and business and generate jobs and livelihoods for people.

Accordingly, the ministry has extended tax exemptions, fee waivers, and payment deferrals, amounting to nearly 900 trillion VND (more than 35.5 billion USD) from 2020 to 2024. In 2024 alone, tax reductions and deferrals are estimated at 189.6 trillion VND, contributing to easing difficulties for businesses and households.

Deputy Director-General of the General Department of Taxation Dang Ngoc Minh highlighted that tax support measures have accounted for 10–15% of annual state budget revenues in recent years.

Revised tax regulations, such as a 5% VAT rate for fertilisers and special provisions for export-processing zones, further demonstrate the government’s commitment to bolstering domestic production and facilitate exports as well as help enterprises to make use of Vietnamese goods' competitiveness.

Public investment remains a crucial driver of economic development. While the Government has accelerated disbursement of public investment, by November 2024, only 54.8% of the annual public investment budget had been utilised, reflecting challenges in project implementation.

Addressing these bottlenecks is essential for advancing infrastructure development, generating employment, and boosting productivity.

The MoF has also urged stringent controls on regular expenditures and efficient revenue management, particularly in sectors like petroleum, gold trading, dining services, and e-commerce. These measures aim to balance the State budget, with the average fiscal deficit between 2021 and 2023 maintained at 3% of GDP, and 2024 projected at 3.4%, within parliamentary limits.

As Vietnam enters 2025, it is forecast to face heightened challenges, including in inflation control and public debt management. Meanwhile, the task for the financial sector is very heavy. The state budget anticipates revenues of over 1.96 quadrillion VND and expenditures exceeding 2.5 quadrillion VND, with a projected deficit of 3.8% of GDP. Experts have emphasised the importance of reasonable fiscal policies to ensure macroeconomic stability and inflation control.

The Ministry of Finance has outlined key priorities for the coming years. These include building and organising the active and flexible implementation of fiscal policies, and expediting significant infrastructure projects that connect regions and improve economic efficiency. Other priorities include strengthening fiscal discipline, reducing unnecessary expenditures, and optimising the allocation of public funds./.