By the end of the first quarter of 2021, thecountry's socio-economic situation had many clear changes. However, with many immediate difficulties, to achieve the annual growth target of 6.5% requires great determination and effort.

It is necessary to innovate the growth model in the direction
of technology-based innovation. Photo: H. Duu

Make effective use of FTAs

In the final session before the XIV Government was consolidated with new members of the Government, all members agreed that in the first quarter, we have fulfilled important goals, not only in the economy but also culture, society, environment, national defense, security, life and belief of the people have increased. According to the General Statistics Office, the macro economy is stable, the economic growth in the first quarter of 2021 is higher than in the first quarter of 2020, estimated to increase 4.48% (it was3.68% in the same period last year). The Prime Minister stated that the economy's key plans were consumption, investment and export continuing to increase much morethan in the same period last year.

Specifically, development investment capital increased significantly, creating a driving force for growth, in which public investment capital increased by 13%, reaching 15% of the plan; realized FDI increased by 6.5%. Total newly, adjusted FDI, capital contribution and share purchase reached more than US$10 billion, up 18.5%. Notably, Vietnamese enterprises' overseas investment increased six-fold. Newly established enterprises increase by 27.5% in registered capital. State budget revenue and expenditure achieved positive results (budget collection was as much as 23.8% of the estimate).

Along with that, import and export activities recorded strong recovery, showing that the economy has been making effective use of the signed Free Trade Agreements (FTAs). Total import-export turnover is estimated at US$152.7 billion, up 24.1%. Vietnam continues to have a trade surplus of over US$2 billion. The consumer price index (CPI) was controlled at a low level, the average CPI in the first quarter compared to the same period in 2020 increased by 0.29%. Industrial production index increased significantly, estimated at 6.5%. Trading activities and consumer services tended to recover

Commenting on Vietnam's economic development, Mr. Jacques Morisset, Chief Economist of the World Bank (WB) in Vietnam, assessed that Vietnam has shown its ability to control Covid-19 and turn the crisis into an opportunity by initially realizing dual goals. Vietnam has enhanced its presence in global trade and its domestic value-added content of exports. Digital transformation is accelerated with better connection and utilization of new information technology tools.

Increase quality of growth

Despite achieving many good results, the economic situation still has many issues of concern.

In the first quarter of 2021, GDP growth; although the level of 4.48% is higher than the growth forecasted in the report in January 2021, it is still 0.64 percentage points lower than the target set in the Resolution 01 / NQ-CP. Minister of Planning and Investment Nguyen Chi Dung said that in order to achieve the 2021 GDP growth target of 6.5%, in the second quarter, GDP should reach 7.19% (higher than 0.08 percentage points compared to Resolution 01); the third quarter needs to increase 6.78% (higher than 0.07 percentage points) and the fourth quarter needs to increase 7.16% (higher than 0.49 percentage points).

However, looking at each component macro index, it can be seen that there are still many issues, such asthe number of enterprises temporarily suspending their business for a term increased by 28.2%; enterprises completing dissolution procedures increased by 26.4%. Passenger transport is still facing many difficulties due to the Covid-19 pandemic, down 11.8%. Unemployment rate of the labor force in the working age group remains high.

In order to have development steps in the future, the Government leaders have outlined many key tasks for ministries, branches and localities. According to experts, these will be very difficulttasks, requiring the management agencies to have reasonable regulations.

Assoc.Prof.Dr. Pham The Anh, chief economist, Institute for Economic and Policy Research (VEPR), said that it is very difficult to achieve an annual growth rate of 6.5%, and growth somewhere around 5% would be more appropriate. But if we are determined to follow the above objectives, the economic policies must be harmonious.

For example, to keep interest rates stable, this is subject to a trade-off, lowering interest rates can cause inflation to soar. In addition, public investment must be disbursed in key national infrastructure projectsand to the right people because infrastructure is the foundation for future growth. If investment is spread out, the works are not essential, it will be both ineffective and cause loss of capital. Besides, we need to continue to attract FDI, because domestic resources are limited while Vietnam has many advantages to attract investment.

“Economic growth in the remaining three quarters of 2021 needs to continue to rely on the export sector, as fiscal and monetary policies are playing a lesser role than in 2020. Vietnam is also export oriented. But it should be emphasized that the economic stimulus policies must be at a moderate level with the right focus without causing waste. If not, it may create a real estate bubble and increase inflation,”Assoc. Pham The Anh said.

Under the above issues, the 2020 annual Vietnam economic assessment report, published by the National Economics University, has stated that the economic growth target is 6.5% as planned. It is very difficult for the Government in the context of the pandemic's unpredictable developments. Moreover, the room for monetary and fiscal policy is not much, so the ability to strongly expand public investment for growth will be difficult.

Supporting policies through reducing fees and charges are being implemented in a spread manner with little real impact that could waste the budget. Policies to support profit or luxury goods are inadequate and need to be redesigned.

Therefore, the report recommends that along with ongoing short-term policies to minimize the negative impact of Covid-19, Vietnam should persevere with longer-term reforms to improve the macro foundation, fundamentally transform the growth model, and increase growth quality. It is necessary to innovate the growth model in the direction of technology - innovation, taking a risk-taking mindset and encouraging entrepreneurship. World Bank experts also said that the current issue of Vietnam for more significant and effective development, so policies need to be more transparent, easier to access and promote "green growth” for sustainable development.