Vietnam needs to improve the export structure with a greater share of Vietnamese exporters in the total export turnover

However, statistical data are showing that Vietnam is confronting numerous difficult challenges like slowing economic growth, a lackluster real estate market and financial market, bad debts at banks and rising pressures of bond maturity. In 2023, employers and employees are forecast to confront numerous difficulties and challenges in business that affect the latter's employment and income. According to a quick survey report on business prospects recently conducted by the Vietnam Chamber of Commerce and Industry (VCCI) in Ho Chi Minh City and some southern provinces and cities, up to 68% of respondents witnessed their orders decline and 23% could not anticipate their business prospects, resulting in employee downsizing and weakening consumer purchasing power. Challenges are more severe when world economic growth prospects are threatened by the pandemic, inflation and weakening global financial systems amid escalating Russia-Ukraine military conflicts and continued supply chain disruptions.

To effectively run the market economy, the Government affects the economy with two main tools: monetary policy and fiscal policy. These policies directly and indirectly exert an impact on the use of resources in the economy to change aggregate economic demands, including macro indicators such as personal consumption, private investment, government investment and net exports.

In early February 2023, being well aware of economic challenges, the Government of Vietnam adopted Resolution 10 to persistently achieve its goals of maintaining macroeconomic stability, controlling inflation, promoting growth, and ensuring major economic balances. Tax exemption and reduction policies have a direct impact on economic performance and people's livelihoods. Many fiscal policies, such as a financial policy package to support house renters and a business support package, have produced positive outcomes.

However, Vietnam is facing the internal challenges of an open economy and more severe impacts of the world's current crises in the context that the manufactured capital of the economy is also rising on increased input prices (gasoline prices sharply jumping to an all-time high, with RON-95 gasoline surpassing VND30,000 per liter in May 2022) and retail selling prices of electricity notably increased by 3% from May 4, 2023 amid forecasts of the upcoming hottest-ever summer that will not only affect human health but also push up living and traveling costs of people, Vietnam is facing challenges regarding wage reform and the trade deficit is coming when inflation goes up in other countries.

Consistent package of short-term and long-term solutions

Vietnam needs to have a consistent package of short-term and long-term solutions to ensure positive macro spillover effects on the entire economy rather than a single policy that benefits an industry or individual or certain enterprises.

The Government has strengthened measures to support short-term demand stimulus like extending the payment deadline for tax and land rent, reducing and exempting tax and land rent. It has actively and flexibly administered the exchange rate in line with macroeconomic and market conditions and reinforced the position of the Vietnamese dong. It has directed credit institutions to reschedule loan repayment terms, keep debt groups unchanged, exempt and reduce interests and fees for troubled businesses and borrowers, and slashed policy rates by 1.5-2% in 2020 in order to reduce the cost of accessing the credit provided by the State Bank for credit institutions and facilitate credit institutions to lower lending interest rates for the economy; at the same time, urged them to minimize operating costs to have more room for lending rate cuts.

Carrying out macro policies and investment policies in line with the master plan on infrastructure, education and healthcare development; assigning public investment disbursement as a key political task of 2023, especially for key national, inter-regional and large urban infrastructure development projects, urban railway projects, North-South expressway component projects, and domestic production projects.

Improving the export structure, increasing the stable and sustainable share of Vietnamese exporters; expanding trade partners to include both suppliers and consumers of Vietnamese goods to diminish excessive dependence on exports to some traditional markets and ease trade deficit.

Completing amendments to the Land Law, making transparent real estate and financial markets to successfully deal with difficulties and obstacles in institutions and policies, site clearance and private and foreign investment attraction.

Necessarily strengthening SOE reform policies to shape a healthy, fair and efficient market and to reduce/keep product costs; developing domestic industrial manufacturing to gradually replace imported inputs with domestic ones to lessen pressures on exchange rates; stepping up technological innovation to boost labor productivity and product quality.

Making good forecasts on market supply and demand by integrating the outcome of solutions applied for macroeconomic stability and international market research to find suitable economic development models for Vietnam to respond to global and domestic changes in the best manner.

Dr. Doan Duy Khuong