Vietnam challenges itself to new goals for economic growth in 2020

When negative impacts of the Covid-19 pandemic on the economy have become clearer, and the economic losses have been basically measured, the Government proposed the National Assembly to consider lowering 2020 economic growth targets. According to experts, although the new goals were decreased, it is not easy to achieve them.
June 01, 2020 | 16:31
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Vietnam challenges itself to new goals for economic growth in 2020
According to experts' forecast, 2020 export growth will be less than 4%. Photo: customsnews

It is said that Vietnam is targeting GDP growth of 5 percent this year, exceeding international forecasts, banking on a rapid recovery strategy to overcome pandemic impacts.

Vietnam’s Prime Minister announced the new target at a meeting with business leaders on Saturday May 9, adding that the country will also strive to keep inflation under 4 percent, same as previous years. VNExpress reports.

Leading international organizations have considerably lowered growth forecasts for Vietnam this year. The World Bank estimates a growth of 4.9 percent, and the International Monetary Fund (IMF), just 2.7 percent. Vietnam’s GDP growth in the first quarter fell to a 10-year low of 3.82 percent.

Simultaneously reduce growth targets

In the supplementary report on the results of the 2019 socio-economic development plan and the implementation of the socio-economic development plan in the first months of 2020, the Government said the goal adjustment in 2020 was necessary and suitable to the objective reality.

Specifically, of the targets adjusted by the Government, GDP is expected to increase by about 4.5% (previously 6.8%) and strive to achieve higher growth. If the global situation is favorable, the pandemic is controlled, and the international market recovers, an increase of 5.4% can be achieved to ensure that the target of 5-year average GDP growth for 2016-2020 period is 6.5%.

Evaluating this action, Dr. Le Quoc Phuong, former deputy director of the MoIT's Industry and Trade Information Center, said when the Covid-19 pandemichad begun affecting Vietnam in early 2020, the Government has not adjusted the growth targets because its impact on Vietnam's economy has not fully assessed.In fact, during the first four months of the year, Vietnam's economic growth was significantly affected by the Covid-19 when GDP in the first quarter only increased by 3.8%, and exports increased by 0.5%.Therefore, adjusting the growth target is appropriate.

The average consumer price in 2020 is expected to increase by about 4% (previously less than 4%), the total exports increases by 4% (previously about 7%), the total state budget revenue decreases by VND163 trillion compared to the assigned estimate, the State budget deficit equals 4.75% of GDP, an increase of 1.31% compared to the previously set target, and fair debt ratio is about 55.5% of GDP, an increase of 3.2% compared to the set target.

(Extracted from the Supplementary report on the results of implementation of the 2019 Socio-Economic Development Plan and the implementation of the 2010 Socio-Economic Development Plan)

However, achieving this new goal is not simple. According to Le Quoc Phuong, Vietnam's economy, especially industry and agriculture, must rely on internal resources, exports and the FDI sector to grow. Meanwhile, the domestic demand has not increased, and the world demand is falling because large Vietnamese partners are currently facing a lot of difficulties due to the pandemic, leading to lower import demand.

“For markets like the EU, US, Japan, South Korea or China, although these markets have gradually opened their economy, and disease control measures have been relaxed, this easing is not entirely, but very cautious, which will continue to greatly affect Vietnam's export market. For a country with a large open economy, up to 200% of GDP, achieving the set GDP growth targets is difficult,” said Mr. Le Quoc Phuong.

Evaluating the expected export growth target of 4%, Mr. Le Quoc Phuong said this was a relatively high and optimistic figure. He said the export growth of 2020 would be less than 4%, even less than 3%. The reason is thatthe export volume and export price have decreased, so the export is facing a decrease in both quantity and price.Regarding GDP, Mr. Le Quoc Phuong said 3% was also a very optimistic figure because Vietnam's economy depended on the world economy, while many countries in the world were forecasted to have a negative growth in 2020, reported on the customsnews.

Vietnam challenges itself to new goals for economic growth in 2020
Can Vietnam achieve GDP growth of 5% this year? (Photo: vietnaminsider)

Not growth-at-all-costs

In this regard, economist Ngo Tri Long said the adjustment of goals was appropriate, but the goals needed be set reasonably to be achieved. With the goals as expected, he said it was difficult to achieve them because we were performing a dual task: fighting the pandemic and restoring the economy and growth, which are equally important.

“Personally, the adjusted target is high in the current context. For example, although the export target has decreased by 4%, currently 10 major importing countries are facing difficulties and economic declines. This shows that achieving the post-adjusted goals is a remarkable success in the context that international organizations predicted Vietnam's growth would be lower, and many countries would experience negative growth,”said Ngo Tri Long.

In particular, the expert noted, besides requiring drastic measures to achieve the growth targets, it is necessary to focus on pandemic control and the effectiveness of growth without sacrificing growth at all costs. For example, public investment could be promoted for growth, but attention must be paid to efficiency and strict control. Therefore, Vietnam is facing double difficulties: promoting pandemic prevention and ensuring growth, the country's resources must be spent on preventing the pandemic and promoting economic development. If the pandemic cannot be controlled, the economy will be affected.

Vietnam challenges itself to new goals for economic growth in 2020
The country must avoid other recession shapes like U or W, with the former indicating a prolonged shrinking of the GDP and the latter showing the economy falling into recession twice before recovering.

“The Government has also developed two economic scenarios in which the GDP growth target is set in the range from 3.6% to 5.4%. I think that the low economic growth will be more suitable, while the high level is a bit difficult. Even if only achieving the lowest level in the scenario is remarkable,” said Ngo Tri Long.

Regarding the prediction of Vietnam's economic growth, before that, the Institute for Economic and Policy Research (VEPR) also proposed three scenarios of economic growth in 2020 based on the ability to control the pandemic. Accordingly, VEPR said the economy could only recover when the disease was controlled both at home and abroad. Notably, this organization forecasted Vietnam's economic growth to be negative in the worst scenario.

In the most optimistic scenario, annual growth will be 4.2%. In the second scenario, if the pandemicis prolonged and only completely controlled in the second half of the third quarter of 2020, the annual GDP growth will be 1.5%. And in the worst scenario, the disease is only completely controlled at the end of the year, the economy starts to recover from the second half of the fourth quarter of 2020, then the economic growth in the whole year will be -1%.

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