Photo: Huong Diu

Positive recovery momentum

Speaking at the Conference to announce the Report "Vietnam's Economy in the first 6 months of 2022: Reform and Sustainable Development" by the Australian Program to Support Vietnam's Economic Reform (Aus4Reform), organized by the Central Institute for Economic Management (CIEM), Dr. Tran Thi Hong Minh, Director of CIEM, said that the first 6 months of 2022 have witnessed a series of important moves by key economies, paving the way for a series of new trends with long-lasting effects to the world economy.

The protracted Russian-Ukrainian conflict affects the supply chains of many basic goods, and at the same time leads to the trend of confrontation-retaliation alliances among the superpowers. The US has begun a period of "normalizing" interest rates in response to high inflation. The Regional Comprehensive Economic Partnership (RCEP) has come into effect, thereby linking East Asian economies to the region's broad-based export recovery.

From the beginning of 2022, the Government of Vietnam continues to implement the approach of "safe adaptation, flexibility, effective control of the Covid-19 pandemic". Along with the good control of the Covid-19 pandemic, the vaccine coverage rate has improved and the number of infections has continuously decreased, restrictions on entry and exit have been gradually lifted.

Vietnam has implemented many policies to promote socio-economic recovery and development, which emphasizes priority on stabilizing the macro-economy and controlling inflation. "Statistics have shown a positive recovery momentum of Vietnam's economy. GDP growth rate reached 5.03% in the first quarter of 2022 and 7.72% in the second quarter of 2022, achieving a relatively similar growth rate to Asia. The growth recovery momentum is clearly shown in all three regions, especially services," said Ms. Minh.

According to CIEM's assessment, Vietnam's economic outlook in the second half of 2022 may be influenced by a number of factors such as the ability to control the spread of Covid-19 variants and new diseases; progress of implementing tasks in the program of socio-economic recovery and development; maintaining macroeconomic stability remains an important foundation to help stabilize market sentiment and "anchor" inflation expectations; the ability to diversify export markets, in association with taking advantage of opportunities from FTAs ​​and handling risks associated with trade-technology confrontation between superpowers, the downward trend of currencies in the region sector against USD; ability to create more opportunities and skills for female workers, thereby helping to take advantage of the potential of this group of workers, especially in rural areas.

Update 2 scenarios

Nguyen Anh Duong, Head of the Department of General Studies (CIEM), said that the report "Vietnam's economy in the first 6 months of 2022: Reform and sustainable development" has proposed two scenarios to update economic forecasts of Vietnam 2022. Accordingly, economic growth in 2022 could reach 6.7% in scenario 1, and 6.9% in scenario 2. Full-year exports are forecast to increase by 15.8% in Scenario 1 and increase by 16.3% in Scenario 2. Trade surplus is forecast at $1.2 billion and $2.5 billion, while average inflation in 2022 is forecast at 4.0% and 3.7%, respectively.

Although Vietnam has experience in handling the Covid-19 pandemic, the risk of world economic recession and domestic inflation pressure has become more pressing. However, the context of the last six months of 2022 and 2023 will expose new reform and governance requirements. In this context, it is even more meaningful to maintain the "recipe" from previous years - maintaining macroeconomic stability to facilitate strong economic institutional reforms in the direction of a modern market.

Regarding solutions for the last six months of 2022, the Director of the CIEM Institute revealed, in the research report on "Promoting economic recovery and economic institutional reform post Covid-19 pandemic: Recommendations for Vietnam” funded by the Aus4Reform Program and announced in April 2021, CIEM has recommended that reforms should be accelerated in parallel with the economic recovery, in order to ease pressure on inflation and make more room for businesses to grow. These recommendations were absorbed when developing the Socio-Economic Development and Recovery Program, with a separate set of solutions on institutional reform, administrative reform, and improvement of the business-investment environment.

Notably, Dr. Tran Thi Hong Minh added that the content of macroeconomic stability can hardly be separated from economic institutional reform.

“We've talked a lot about inflation over the past few months. However, the lessons in dealing with inflation and the consequences of the global financial crisis in the 2008-2009 period are still valid: measures such as controlling aggregate demand - i.e. loosening or tightening fiscal-monetary only– are unable to promote macroeconomic stability, creating a foundation for economic growth," Ms. Minh said.