If measures are not taken quickly, Vietnam's growth will be slower than that of other countries in the region and fail to take opportunities from the rapid recovery of major partners.

Economic recovery must be associated with economic reform, restructuring,
enterprise reform, and investment reform. Photo: VNA

Handling “bottlenecks” in public investment

The economic growth target of 6% to 6.5% by 2021 is facing many obstacles when the fourth wave of Covid-19 that appeared from the end of April has developed, negatively impacting important sectors, fields and geographical areas, making great contributions to economic development.

In a recent announcement, the Asian Development Bank (ADB) lowered its GDP forecast for Vietnam to 5.8% from 6.7% in April. This is due to the lack of vaccinations and the application of prolonged social distancing in the largest growth areas of the country, affecting trade circulation and limiting economic activities. Standard Chartered Bank also forecast that Vietnam's GDP growth in 2021 will reach 6.5%, slightly down from the previous forecast of 6.7%.

Assessing the economic situation in the first seven months of the year, Minister of Planning and Investment Nguyen Chi Dung said that the situation and data in July show that difficulties and challenges are not small. Production, business, trade, investment, enterprise, export, goods circulation and consumption activities in pandemic-affected areas face many difficulties, significantly affecting the overall results of the whole economy.

In order to have a basis for operating, the Ministry of Planning and Investment has also developed two scenarios to reach the growth target assigned by the National Assembly and the Government.

Accordingly, in the first scenario, in order to achieve the economic growth target of 6%, the third quarter needs to achieve a growth rate of 6.2%; the fourth quarter by 6.5%; in the second scenario, to achieve the economic growth target of 6.5%, the third quarter must achieve a growth rate of 7% and the fourth quarter by 7.5%.

At the same time, the Ministry of Planning and Investment also proposed two groups of solutions in health and economy.

To create a foundation for growth, the health solutions group will focus all resources on promoting the implementation of vaccinations, which is the fundamental solution for disease control.

In terms of economy, focus on developing scenarios, roadmaps and conditions for reopening the economy, both helping the Government to take the initiative in operating, and helping people, businesses to boost production and business. The reopening scenario needs to set out important milestones such as reopening aviation, international travel, and reducing the isolation period for people who have been vaccinated. The extent of reopening the economy will correspond to the situation of disease control and vaccination rates.

In the first seven months of 2021, the total state budget capital of ministries, central agencies and localities that allocated and assigned detailed plans to projects eligible for disbursement is VND398,616.466 billion, reaching 86.4% of the plan assigned by the Prime Minister, of which domestic capital reached 86.05% of the plan, foreign capital reached 89.27% of the plan.

The amount of capital that ministries, central and local agencies has not yet allocated in detail for the remaining projects is VND62,683,534 billion, equal to 13.6% of the plan assigned by the Prime Minister.

Expected disbursement of public investment capital by July 31, 2021 is VND169,335.05 billion, reaching 36.71% of the plan assigned by the Prime Minister, down from 40.67% of the same period in 2020, of which domestic capital reached 40.38%, foreign capital reached 7.52%.

However, excluding the unallocated capital, the plan will be assigned and disbursed in accordance with the provisions of the Law on Public Investment and Resolution No. 129/2020/QH14 of the National Assembly on the allocation of the central budget in 2021 stating that above, the disbursement rate reached 42.48%, a slight increase compared to the same period last year.

In which, 10 ministries and 32 localities have disbursement rates above the national average (36.71%); seven ministries and central agencies have not yet disbursed capital plans and two ministries and central agencies have disbursed but the disbursement rate is less than 1%.

Economic expert Hoang Van Cuong said that the driving force for economic growth depends heavily on the speed of implementation of support solutions for people and businesses; expanding commercial activities, taking advantage of opportunities from FTAs and digital transformation, accelerating disbursement of public investment capital.

This is the short-term and long-term driving force for Vietnam's economic growth and is also measures that Vietnam has drastically taken since the Covid-19 pandemic broke out in early 2020.

“In the context that the economy is still heavily affected by the pandemic, accelerating the disbursement of public investment capital is important to support growth, creating spillover effects on many other fields. However, more than half a year has passed, the disbursement of public investment capital by many ministries, branches and localities is still quite slow. It is necessary to be determined to remove obstacles in the procedure to promote this important source of capital,” said economist Hoang Van Cuong.

Economic recovery must be associated with reform

Regarding economic growth prospects in the last months of the year, many economic experts said that the Government is on the right track in defining and implementing vaccine strategy and key economic policies.

According to economist Vo Tri Thanh, Vietnam is still closely tied to the trend of the world, in which, the global economy will face three major obstacles.

Firstly, the situation of scarcity of supply continues to increase, input competition is still strong, pushing up commodity prices.

Secondly, some countries halted monetary easing in the context of inflation soaring to its highest level in recent years. Many countries are closely monitoring developments in the consumer price index (CPI).

Thirdly, logistics capacity is no longer guaranteed as before the Covid-19 pandemic, the cost of renting empty containers has increased rapidly.

“These issues affected the Vietnamese economy, causing growth to face many challenges. Therefore, Vietnam's strategy at this time is not only to overcome challenges from the Covid-19 pandemic but also to keep pace with the global recovery momentum. If not, Vietnam's growth will be slower than that of other countries in the region and will not be able to take the opportunities from the rapid recovery of major partners," said Mr. Vo Tri Thanh.

According to economist Vo Tri Thanh, the economy still faces risks such as complicated developments of the Covid-19 pandemic with the appearance of new variants, inflationary pressure and the increase in prices of other commodities.

Therefore, economic recovery must be associated with reform, economic restructuring, enterprise reform and investment reform.

According to Ms. Tran Thi Hong Minh, Director of CIEM, in the context of pursuing "dual goals" as well as shaping the approach to a number of economic policy reform issues, Vietnam needs to focus on into three important solutions.

Firstly, ensuring parallels between macroeconomic policy and micro-economic reform, towards green recovery and sustainable recovery.

Secondly, promoting business recovery and improving internal capacity, the degree of economic autonomy associated with effective implementation of the process of international economic integration.

Thirdly, promoting innovation, developing science and technology towards the digital economy; adding new skills to improve productivity.

Assoc. Prof.Dr. Dinh Trong Thinh, Senior Lecturer at Academy of Finance:

Public investment is one of the major issues that the Party, State and Government want to promote to create a driving force for economic growth and development. Although there are Investment Laws and Public Investment Laws, public investment still has disadvantages. For example, the state of investment is spread across many different localities, industries and fields. In fact, every year there are tens of thousands of investment projects in all areas of the country. But each year the number of completed projects or works put into use is too small compared to the amount of investment capital spent.

In order to solve these inadequacies, it is necessary to control the number of investment projects, when launching any project, it must be really necessary and have a long-term impact. We must tighten the discipline of building investment projects, explain and make preliminary projects. Preliminary projects must be strictly inspected and supervised. State management agencies must check, supervise and balance the resources of the economy with the needs and capabilities of investment activities in the best way.