Maintaining macroeconomic stability

In 2020, with success in containing the virus, Vietnam’s economic growth, albeit slower than the previous year, still reached 2.91%, making Vietnam one of the few countries with positive growth. But in 2021, the Delta variant caused the fourth wave, dealing a serious blow to the economy with disrupted supply chains and factory closures.

Manufacturing cars at Vinfast (Photo: Ngo Quang)

Like other countries in the world, Vietnam responded with timely policies, notably the vaccination campaign. To date Vietnam has inoculated over 74 million people, accounting for 77% of the population, in which 55 million have been fully vaccinated. The deployment of healthcare workers was also implemented in a rapid and aggressive manner to meet the nationwide treatment needs.

Along with the foremost task of protecting people’s health, the government also promptly introduced support programmes over the past two years with a total value equivalent to 3% of GDP. Such packages met the needs in the fight against COVID-19, such as the procurement of medical supplies and vaccines, providing financial support for enterprises and ensuring social security for people in areas hit by the virus. The monetary policy helped pandemic-affected enterprises and individuals continue to have access to bank loans.

As global inflation is picking up, Vietnam’s consumer price index is kept under 2%, far below the target of 4%. The assessment and prediction of inflation in 2022 and subsequent years is highly important so that Vietnam can formulate and implement post-pandemic recovery programmes effectively.

Room for expanding fiscal, monetary policy

The new Omicron variant has raised global concerns. The recovery and stimulus packages prepared under the government’s direction, are designed to ensure a financial resource that is large enough to cover a wide range of economic sectors and a period of at least two years from 2022 and 2023.

First and foremost, this resource will be allocated to pandemic prevention activities such as protecting public health as the top goal in all social policies. In 2022, preparing a reserve of vaccines is extremely important to protecting public health and ensuring socio-economic recovery.

The second area that needs attention is social security, so that the people’s difficulties will be addressed, by supporting house rental costs and vocational training fees for workers. Next the government should support enterprises by reducing taxes and fees, lowering interest rates, cutting electricity and telecommunication bills, and providing assistance in digital transformation and innovation. In addition, it is necessary to increase public investment in key projects to create a widespread spill over effect on the economy.

As the global economy is recovering rapidly and putting pressure on inflation, Vietnam needs to make a careful assessment of inflation trends in 2022, both in Vietnam and in the world. Accurate forecasts will help Vietnam find out new policies to stimulate the economy post-pandemic.

Rising inflation is a clear trend in the world, especially in the first half of 2022 and it will partly affect domestic consumer prices. But it is forecasted that inflation in 2022 will only rise slightly compared to 2021, at about 3.3% against 3.2%.

In the past several years, the fiscal policy has been implemented in a tight manner, so Vietnam still has much room to mobilise financial resources for the economic recovery programme. In 2022, the size of recovery package should be about 3% of GDP. Then it is necessary to assess its impacts on the economy before introducing another package or making necessary adjustments. The important thing is combining monetary and fiscal policy in a harmonious manner through a strict supervising mechanism, then Vietnam can regain the growth momentum of 6-7%, while still maintaining macroeconomic stability and keeping inflation in check.