In the midst of a global economic landscape painted with shades of uncertainty, Mr. Vu Hong Thanh, Chairman of the Economic Committee of Vietnam’s National Assembly, has heralded Vietnam as a beacon of hope and resilience. During a press conference held as part of the Vietnam Social and Economic Forum 2023, themed “Enhancing Internal Strength, Creating Momentum for Sustainable Growth and Development,” Mr. Thanh’s remarks underscored Vietnam’s remarkable economic stability and promise.
A Shining Amidst the Gray
Addressing attendees at the forum on September 18, 2023, Mr. Thanh boldly declared Vietnam’s resilience amidst the global economic challenges. He emphasized that Vietnam’s macroeconomic indicators remained stable during the first eight months of the year, with core inflation well-contained at a modest 3.1%. This stands in stark contrast to many major economies grappling with soaring inflation rates. Key economic metrics such as public debt, external debt, and government debt continue to be well within control and fall below the limits set by the National Assembly. Furthermore, Vietnam’s national credit rating experienced an improvement, with Moody’s upgrading it last year, making Vietnam the sole ASEAN nation to receive such a credit rating boost.
In Mr. Thanh’s words, “Vietnam’s economy still shines amidst the overall grayness of the global economic landscape”. These sentiments resonate with a nation that has demonstrated resilience and adaptability in the face of adversity.
Positive Economic Indicators
According to the government’s report, Vietnam’s GDP for the second quarter of the year exhibited an impressive growth rate of 4.14%, surpassing the first-quarter growth by 3.28 percentage points. This robust performance is contributing to an enhanced GDP growth rate of 3.72% for the first half of the year and is expected to drive growth throughout the year.
One notable testament to Vietnam’s economic vitality is the establishment of over 14,000 new businesses in August alone, marking an impressive 18% increase compared to the same period in 2022. In aggregate, the first eight months of the year witnessed a 2.3% increase in new business registrations, totaling 103,700 new enterprises. The service sector, in particular, demonstrated rapid growth, with total retail sales of goods and consumer services in August surging by 7.6% compared to the same month in the previous year.
Challenges and the Path Forward
Despite these positive developments, Mr. Thanh acknowledged that Vietnam’s economy still faces certain internal challenges. Some growth drivers, such as investment, exports, and consumer spending, have experienced a deceleration, necessitating remedial actions.
Notably, disbursement of public investment in the first eight months reached just over 42.3%, indicating room for improvement. Additionally, many businesses continue to grapple with the aftermath of the COVID-19 pandemic, leading to production difficulties and a shortage of orders. The bond market and access to credit remain challenging areas.
Nguyen Duc Hien, Deputy Head of the Central Economic Commission, offered further insights, cautioning that certain economic development indicators for the year might not be met, including the proportion of manufacturing and processing industries in the GDP and labor productivity.
Hien emphasized the importance of focusing on long-term labor productivity for sustained growth. Experts and delegates at the forum agreed on the need to strengthen internal capacities and explore new growth drivers for sustainable development.
Continuation of VAT Reduction
Turning to fiscal policy, Vietnam’s decision to reduce the value-added tax (VAT) by 2% on goods and services subject to a 10% tax rate until the end of 2023, excluding real estate, banking, securities, and insurance sectors, was revisited during the press conference.
Mr. Thanh noted that preliminary surveys indicated continued support from both the public and businesses for extending this policy in the foreseeable future. He emphasized the significance of the domestic market and argued that extending this policy would aid citizens and businesses, stimulate overall economic growth, and bolster domestic consumption.
In 2022, the 2% reduction in VAT contributed to a cost reduction of approximately VND 44.5 trillion for businesses and individuals, leading to lower prices for goods and services, boosting production and job creation. Notably, domestic VAT revenue increased by 10% compared to the same period.
Income Tax Revisions Await Action
Regarding changes to personal income tax, including adjustments to family deductions, Mr. Thanh revealed that although various proposals have been discussed, the Finance and Budget Committee has yet to receive an official proposal. Therefore, the responsibility now falls on the National Assembly to expedite these deliberations.
As Vietnam navigates the challenges and opportunities in its economic landscape, the nation’s leadership remains committed to sustaining and further enhancing its position as a bright spot in the global economy. The forum provided a platform for experts and delegates to chart a course towards a resilient and prosperous future for Vietnam.