Economic experts have warned that heavily reduced purchasing power, in addition to numerous difficulties faced in production and business activities, are likely to have a serious impact on the overall state of the enterprise system.

Low purchasing power is greatly affecting production,
business, and overall economic growth

According to figures released by the Ministry of Planning and Investment, despite total retail sales of consumer goods and services prospering in May with a 26.9% rise from the previous month, they still dropped 4.8% compared to the same period from last year.

Following the index of total retail sales, the growth rate of the industrial production index stood at only 1%, a figure in contrast to the 9.5% increase seen during the corresponding period in 2019. This therefore personifies the plummeting purchasing power of both domestic and export markets.

Economic experts have therefore raised concerns over the figures amid the current economic context due to low purchasing power greatly affecting production, business, and overall economic growth. 

Therefore, as a means of promoting economic development, one effective solution currently is to stimulate demand domestically. Indeed, the size of the local market is viewed as a fulcrum which can help businesses maintain production and eventually overcome the effects of the pandemic.

Over the long term, the growth of the domestic market will provide a boost to the production of local goods as they develop in a strong and highly competitive manner, therefore serving domestic consumption and exports. It is hoped that this boost will simultaneously make an important contribution to the nation’s socio-economic development for the duration of the year and in subsequent years moving forward.

According to the World Bank, at present approximately 15% of the country’s population are part of the global middle class. In line with the current growth rate, 1 million more Vietnamese citizens will join this group each year. It is anticipated that the emerging middle class will consume a greater number of products and services with a better quality, therefore requiring domestic businesses to improve their capacity through efficient and innovative use of resources.

Other experts note that the domestic market can be considered a "savior" for many local firms and to the national economy, therefore it is a necessity to devise solutions aimed at stimulating domestic consumption and supporting local enterprises through production, business, and retail.

Indeed, Can Van Luc, an economic expert, said that in the current difficult conditions, an important task for the immediate future is to push ahead with ensuring effective disease prevention and control, in addition to stimulating domestic production and consumption.

During a recent regular cabinet meeting, Prime Minister Nguyen Xuan Phuc emphasised that in order to recover the economy following the epidemic, it remains imperative to boost domestic market demand with regard to personal consumption, trade, and services.

Commenting on the direction taken by PM Phuc, businesses believe that promoting economic recovery whilst stimulating supply and demand within the domestic market remains the best way to boost growth in the context of the global epidemic situation remaining complicated with unpredictable developments ahead.