The Vietnamese government will take further bold measures to avoid economic contraction and even collapse, according to Prime Minister Nguyen Xuan Phuc.

Prime Minister Nguyen Xuan Phuc at the conference. Source: VGP.

A disruption to socio-economic activities and failure to set the state for a strong economic recovery in the post-pandemic period would lead to severe consequences for the society and economy, including civil unrest, Phuc said at a national online conference on April 10.

According to Phuc, to date, the government has rolled out supporting programs such as a credit aid package worth VND300 trillion (US$12.87 billion), a VND180-trillion (US$7.63 billion) fiscal stimulus package in forms of delay of payment of value-added tax, corporate tax and income tax, and a financial support package for vulnerable people worth VND62 trillion (US$2.7 billion).

However, Phuc said more is needed to ensure the economy gets on track for recovery, adding after this conference, the government would issue a comprehensive resolution detailing measures to address concern of the business community and help spur economic growth.

Phuc requested government agencies to set up growth scenarios after the pandemic, with the Ministry of Planning and Investment being tasked with proposing preliminary solutions to buttress the economy next week.

Minister of Planning and Investment Nguyen Chi Dung said the pandemic has disrupted global value chains and trading activities, and caused a plunge from both the demand and supply sides.

In the domestic front, an increasing number of enterprises are forced to scale down or suspend operations while key economic sectors have suffered a sharp decline in growth that directly resulted in job losses, wage reductions and lay-offs.

While the country's GDP growth recorded a 10-year low of 3.82% year-on-year in the first quarter (Q1), the longer the pandemic persists, the bigger impacts it causes to the economy, Dung said.

The GDP growth target of 6.8% remains challenging and difficult to reach this year, Dung added.

In case the Covid-19 pandemic is contained in Q2, Vietnam’s GDP is predicted to expand 5.32%, but if the Covid-19 continues into Q3, the growth rate could be around 5.05%.

Meanwhile, the consumer price index (CPI) may grow above the government target of 4% if the government cannot tame price fluctuations.

At the meeting, Minister of Finance Dinh Tien Dung said a state budget revenue fallout is inevitable in the context of economic slowdown.

Dung said in the most optimistic scenario when the pandemic ends in Q2, GDP growth comes in at 5.3% and oil prices average at US$35 per barrel, the state budget may lose VND140 – 150 trillion (US$6 – 6.43 billion). The losses would be bigger in case GDP grows at less than 5%.

Dung recommended government agencies, provinces and cities reduce regular spending, especially expenses related to meetings, conferences and working trips.

The Ministry of Finance estimated fiscal deficit could increase to 5 – 5.1% of GDP, significantly higher than the target of 3.4% (excluding debt principal repayments) set in December 2019.

Dung said in this circumstance, the realization of public disbursement plan is essential to maintain positive economic growth and stimulate social investment.

In 2020, the target amount is VND700 trillion (US$30 billion), more than double the disbursed amount in 2019 of VND312 trillion (US$13.4 billion).

“The Ministry of Finance is committed to providing sufficient capital for disbursement,” Dung stressed.