The high inflationary pressure amid the recovery of domestic demand is putting Vietnam’s GDP growth target of 6-6.5% for this year at risk.

Overview of the session. Source: quochoi.vn

Deputy Prime Minister Le Van Thanh gave the remarks at the third session of the 15^th National Assembly held today [May 23].

According to Thanh, the Vietnamese economy has been on a positive recovery track in the first months of 2022 under the new normal.

Total budget revenue for the first four months grew by 15.4% year-on-year to VND657.4 trillion ($28.4 billion), while the consumer price index (CPI) expanded by 2.64%, the lowest four-month period growth in the past five years.

As of mid-May, credit growth stood at 7.2% against late 2021 and up 17% year-on-year, which showcases the recovery of economic activities, along with greater efforts from the Government to restore discipline and order in the stock market, Thanh said.

Other highlights of the economy included the country’s trade surplus of $2.53 billion during the January-April period, up nearly $1 billion year-on-year. FDI commitments to Vietnam also doubled to $11 billion, and disbursement of the foreign capital investment reached nearly 8%.

“This is evidence of the high expectation of foreign investors to the recovery of Vietnam’s economy,” Thanh said.

Meanwhile, the market also witnessed the incorporation of 80,500 new businesses and those resuming operations, up 27% year-on-year.

Thanh, however, expressed concern over the high inflationary pressure on the economy. “The issue, combined with rising prices of strategic commodities in the global market, shortage of workforce, high transportation costs, and disruption of supply chains from China, could further impact Vietnam’s economy in 2022 and subsequent years,” he added.

The CPI growth in April nearly doubled the 2018-2021 period to 2.09%, for which Thanh said the inflationary pressure may limit the effectiveness of the Government’s supporting policies for businesses and people, eventually hurting the overall macroeconomic situation.

Thanh also pointed out that recent rate hikes from FED and ongoing Russia-Ukraine conflicts are issues of concern for Vietnam’s economic prospects.

In the coming time, Thanh expected the Government to continue maintaining flexible and effective management of fiscal and monetary policies.

“More efforts are expected to address tax losses, transfer pricing, and waste in budget management; restructure the banking sector in line with resolving bad debts, monitoring the corporate bond and stock markets,” he said.

With a public investment as a key measure to boost growth, Thanh said the Government would transfer funds from provinces/cities with slow disbursement to those disbursing at a faster pace.

Deputy Prime Minister Le Van Thanh.

Efforts needed to stabilize the prices of strategic commodities

At the discussion session, Chairman of the National Assembly’s Economic Committee Vu Hong Thanh urged the Government to address risks from high prices of essential commodities, especially gas and fuels.

In Vietnam, the supplies of fuel and gas took a huge blow from the products’ high prices in the global market.

The low production capacity of the Nghi Son Refinery plant, accounting for 35-40% of total domestic supplies, added up to the issue. The Ministry of Industry and Trade has instructed local traders to turn to import sources, but rising prices and the disruption caused by the Ukraine-Russia conflict have exerted little impact in preventing fuel prices from rising further.

While the Government has cut the environmental protection fee by 50% from April 1 to the end of 2022, the Committee suggested the Government should consider a further reduction in excise taxes on fuels and gas in the ongoing context of volatile prices in the global market.

“Vietnam must be cautious about importing inflation as prices of strategic commodities continue rising,” he added.

Thanh also expressed concern over the slow progress in public investment during the first four months of 2022 at 16.4%, lower than the pace recorded in the same period of last year, calling for the Government to take drastic measures to boost public investment in the coming months.

“The Government needs to ensure the supply-demand of key commodities and stabilize the prices, especially electricity, coal, fuel, fertilizer, or construction materials,” he added.

“Measures are also required to maintain the supply chains to avoid unnecessary disruption, along with the reopening of tourism and domestic markets,” Thanh said.