Vietnam’s drivers of growth are relatively clear and strongly leading. Digital transformation is particularly seen as an opportunity to improve labor productivity and expand service and product distribution networks. Mr. Nguyen Minh Cuong, ADB Chief Economist, gives an exclusive interview to Vietnam Business Forum on this topic. Anh Mai reports 

Digital transformation is both a challenge and an opportunity for Vietnam. From ADB's perspective, what do you think about this? 

Vietnam has achieved a lot in this aspect. Vietnam may lag behind in industry or services, but it is not the case for digital transformation, which is actually on par with other countries. Therefore, the opportunity to catch up and even surpass other countries is huge and the country needs to make good use of it. 

As most factors for growth, especially those for labor productivity improvement, have almost run out, science, technology and digital transformation will become a vital driving force for Vietnam to continue improving growth, especially labor productivity. 

Digital economy is talked about much but it can never replace the real economy. The former only supports the latter. Digital economy plus automation can increase labor productivity in processing and manufacturing industries and services, expand distribution networks and customer base. 

In fact, the digital economy and the real economy are integrating. This integration poses certain risks, one of which is online fraud and virtual currency in the financial and banking industry. To overcome these challenges and risks, Vietnam needs a strict policy and legal framework and consumers must have certain knowledge.

ADB forecast Vietnam's GDP growth at 6.7% this year, higher than the target set by the National Assembly and the Government of Vietnam. How can Vietnam achieve this growth?

ADB is very optimistic about Vietnam's economic growth in 2021. Although the pandemic is complicated in neighboring countries, with its experience in pandemic prevention and foreign investors’ confidence, and the Vietnamese people and Government's resolution to continue strong economic growth in the wake of the consolidation, it can be said that Vietnam's growth in 2021 is relatively positive.

The main driver of growth is industry, especially manufacturing, it is closely linked to exports. In addition, major economies in the world, particularly Vietnam's major partners like the United States and China, are on the path to stronger-than-expected recovery. As a result, manufacturing is forecast to expand by 9.5% in 2021 to lead other sectors.

Another important driver is investment, both public and private. Private investment is a bright spot thanks to low interest rates and increased public spending. The drivers, which are relatively clear and strongly leading, are reinforcing Vietnam’s positive growth outlook in 2021, although risks are still lingering.

What are the biggest risks to Vietnam's growth in the short and long terms?

The biggest short-term risk to Vietnam as well as other countries is still the COVID-19 pandemic due to its notorious unpredictability. This risk is almost beyond control.

The next is vaccination deployment. Asia has a relatively low vaccination rate relative to the world, averaging 5.2 doses per 100 people, while the global average is close to 8 doses. The slow vaccination is a big risk.

In the long term, Vietnam's challenges are still climate change, institutional performance and digital transformation.

Central banks in the world still keep easing monetary policies in 2021 to support economic recovery. How should Vietnam apply such a monetary policy?

There are not many signs of loosening monetary policy, even possibly curbing it in 2021 to rein in real estate and stock growth. If we look back to 2020, Vietnam’s money supply (M2) growth was relatively high as compared to other countries in the region despite its GDP expansion of 2.9%. In addition, the growth of stock and real estate markets from the end of the first quarter of 2021, increased nonperforming loan (NPL) ratio after the pandemic and slightly growing inflation notwithstanding slowdown in 2020 are unsupportive of a further loosening of monetary policy in the coming months.

To support businesses, besides monetary and fiscal easing, it is important that the Government should provide more support for exporters, investors and manufacturers, especially export-oriented manufacturing, incremental investment and expansive trade.

Moreover, although the business environment has improved a lot in recent years, and business procedures and conditions have been simplified, the pace of improvement has not met the expectations of businesses. Therefore, it is necessary to pay attention to the implementation stage, how policies really come to businesses, and avoid cumbersome procedures.