|Vietnam should persist with longer-term reforms to improve macro fundamentals and minimize future risks.|
Redesign support packages
The Covid-19 pandemic has had negative effects, as well as deep, direct and indirect impacts on the global economy. Some countries around the world have considered many long-term solutions, including unprecedented large-scale stimulus packages to remove difficulties.
According to Ms. Nguyen Thi Hong Minh, Director of CIEM, a number of important policy requirements from the experience of many economies dealing with the Covid-19 pandemic and economic recovery include: ensuring effective Covid-19 prevention and control, producing, accessing and disseminating information; accelerating the application of digital technology; consider the timing of large-scale stimulus measures and the necessary policy room; implementing institutional reforms to increase the effectiveness of measures for economic support.
“We assess that Vietnam’s economic prospects in the next three years, the period 2021-2023, is based on three scenarios. If breakthroughs in the quality of institutional reforms leading to improvement in growth quality are achieved along with monetary and fiscal easing measures at the right focus and at the right time, the average GDP growth rate can reach 6.76% per year in the 2021-2023 period, accompanied by a significant improvement in productivity. At that time, Vietnam’s economy will recover faster and see more sustainable growth, even if the world economy still has many uncertainties. At the same time, ensure that policies towards economic recovery are closely linked with economic institutional reform in Vietnam in the future,” said Ms. Nguyen Thi Hong Minh.
Assessing the development of policies to support the economy, the economic expert, Assoc. Prof. Dr. To Trung Thanh (National Economics University) said that at the macro-oriented level, Vietnam had very little monetary and fiscal room. If support policies through reducing the collection of fees and charges spread, they would affect the budget, the beneficiaries should be narrowed based on the extent of the impact of the pandemic.
Therefore, policy efforts should focus on cutting lending rates rather than deposit rates. The number of enterprises accessing and receiving monetary support was still limited compared to the set target.
Therefore, support policies need to be clear and transparent and unnecessary barriers need to be reviewed and removed. In addition, due to unpredictable developments of the pandemic, social security packages for the affected subjects need to be maintained to remove difficulties, while the disbursement of support packages should be accelerated.
According to economist To Trung Thanh, along with the short-term policies implemented to minimize the negative impacts of Covid-19, Vietnam should persevere with longer-term reforms to improve the macro economic foundation and minimize future risks.
Long-term solutions to fundamentally transform the growth model and increase the quality of growth need to be resolutely implemented with the highest political determination. Accordingly, the new economy could maintain production during the pandemic, recover quickly, and progress to sustainable development. Therefore, it was necessary to renew the growth model towards technology-based, innovative, risk-taking and encouraging entrepreneurship.
Persevere with “long-term” reforms
The biggest challenge for the Vietnamese economy is the resilience of the economy when the wave of infection returns. According to Assoc. Prof. Dr. Pham Hong Chuong, Rector of the National Economics University, the economy’s stamina depended on the room of support policies from the Government.
Requiring the Government to take more drastic solutions to strengthen the economy’s resistance, prepare enough capacity to cope when the pandemic persists. Thereby enhancing the potential for a quick economic recovery as soon as the pandemic was under control, preventing the economy from falling into recession.
In the Report “Evaluation of policies to respond to Covid-19 and recommendations”, conducted by the National Economics University in collaboration with the Japan International Cooperation Agency in Vietnam (JICA), based on the assessment of the Government’s recent Covid-19 response policies, as well as in the context of negatively affected budget revenues, while the expenditure demand on preventing and overcoming the consequences of the pandemic increased, the research team recommended that in order to implement policies to support pandemic and natural disaster prevention, in the future, the Government should prioritize measures of mobilizing financial sources.
Specifically, it was necessary to cut recurrent expenses by at least 10%, in particular, unnecessary expenses such as seminars, conferences, domestic and foreign business trips. At the same time, it was necessary to take advantage of preferential loans (no interest or very low interest rates) if available from international organizations with the goal of preventing and overcoming the consequences of the pandemic and natural disasters. And issue government bonds with low interest rates in the current situation of excess liquidity in the financial system.
Many economic experts also said that loosening monetary policy should be very cautious in terms of scale and length of time, especially when economic activities are active again.
Fiscal policy should focus on spending on key tasks, saving, and supporting subjects who really needed it. The highest priority was to support those who have lost their jobs, both in the formal and informal sectors, cost support for affected enterprises.
Inadequate profit or luxury goods policies should be redesigned. In addition, the Government also should narrow the beneficiaries of the policy, reduce the collection of fees and charges based on the impact level of the pandemic.
Policies related to social security must be ranked in order of top priority. Along with that, it was necessary to accelerate the disbursement of public investment capital; focus on cutting lending rates rather than deposit rates; at the same time, closely monitor credit flows into risky and non-productive sectors to ensure a healthy credit structure and system safety in the future.
According to Assoc. Prof. Dr. Tran Dinh Thien, former Director of the Vietnam Institute of Economics, along with short-term policies being implemented to minimize the negative impact of the Covid-19 pandemic, Vietnam should persevere with longer-term reforms to improve the macro fundamentals and reduce future risks.
Such as innovating the growth model towards technology-based – innovating, perfecting institutions, respecting and protecting equality among economic sectors; developing an innovative, dynamic and creative private sector.
These long-term solutions to fundamentally transform the growth model and increase the quality of growth should be resolutely implemented with the highest political determination.