Principal Country Economist of the Asian Development Bank (ADB) in Vietnam Nguyen Minh Cuong told The Hanoi Times about his view on the country’s economy in a world full of uncertainties.

Principal Country Economist of the Asian Development Bank (ADB) in Vietnam Nguyen Minh Cuong. Source: ADB Vietnam

What is your assessment of Vietnam’s economic prospects in 2022?

Since last October, Vietnam had moved away from hard Covid-19 containment measures to a more flexible strategy. This, combined with a high vaccination rate, helped Vietnam’s economy return to the path of recovery right in late 2021.

Given the pandemic gradually being under control, I expect the three main growth driving engines for Vietnam, including manufacturing and processing, services, and agriculture, would rebound strongly.

In addition, domestic demand would spur Vietnam’s economic growth in the coming quarters, while trade and foreign investment are also positive factors.

Vietnam’s large network of free trade agreements would come in handy in this case and help the country diversify its export markets. The country also boasts a variety of export products. So, these two factors are the basis for Vietnam’s trading activities to expand sustainably.

Last but not least, Vietnam’s socio-economic recovery program for the 2022-2023 period, estimated at US$15.4 billion, is seen as a major boost for domestic production.

In this regard, I expect nothing but a bright outlook for Vietnam’s economy in 2022, and the ADB forecast the country’s GDP growth to be around 6.5% in 2022 and 6.7% in 2023, a significant improvement from a modest 2.58% in the previous year.

What is your expectation about the Government’s upcoming recovery program?

This is a comprehensive support package. The first part of the program is a tax cut, which benefits almost all economic sectors and businesses.

Meanwhile, a big chunk of the program would rely on public investment, which reflects the Government’s vision of improving the infrastructure system in the medium and long term. This would no doubt lay the foundation for sectors such as industry and construction to further expand.

I expect these public investment projects if implemented in a timely and effective manner, would be essential for Vietnam’s recovery in the 2022-2023 period.

But the question remains whether the Government could implement the program in two years, as disbursement of public funds has always been an issue in recent years, not to mention the Covid-19 impacts.

To further speed up the process, the first thing Vietnam should focus on is simplifying investment procedures, including those related to ODA projects.

The Government also should delegate more responsibilities to leaders in provinces/cities and agencies. Without drastic measures from the grassroots level, it would be hard for Vietnam to achieve its public investment targets.

How do you rate the Government’s ongoing support for the economy, especially during a time when petrol prices are skyrocketing and putting strains on growth?

Vietnam has made significant progress in administrative reforms since the pandemic first emerged two years ago. The most notable change comes from tax reforms and deductions to aid businesses and people.

This shows a high political determination from the Government, as such a move would have a big impact on the state budget.

Meanwhile, the recent cut in environmental protection tax on petrol products came at the right timing to relieve inflationary pressure on the economy.

As room to further maneuver fiscal and monetary policies has been limited, price management is a key tool for the government, especially for petroleum products.

But this should only be considered a short-term solution. Stabilizing petrol prices are medium- and long-term targets, which requires comprehensive solutions to avoid being put in the backseat when a similar situation happens in the future. 

What are the main challenges for Vietnam’s economy in the coming time?

First and foremost is the ongoing Russia-Ukraine conflict, which is seen to have a much bigger impact on the global economy compared to the Iraq war.

For Vietnam, however, the direct impact of the conflict on the economy is insignificant, given its bilateral trade relations with Russia and Ukraine account for less than 1% of total turnover.

But the main concern would come through the health of the global economy, as the latest forecasts showed the global economic prospects to be dim in 2022. In this context, major economies in the world, which are also key trading partners of Vietnam, would face setbacks as a consequence of the conflict, leading to lower demand for trade and subsequently impacting Vietnam.

Another issue is the rising prices of key commodities in the global market. For example, oil prices have reached US$130 per barrel. In the past days, the prices have somewhat declined, but remained high and resulted in high inflationary pressure in many countries, including Vietnam.

On the other hand, there would be new opportunities for Vietnam, such as growing global demand for agricultural products, but at the end of the day,  2022 would be the year of challenges and difficulties.

Thank you for your time!