The accumulated risks are gradually increasing
Dr. Nguyen Dinh Cung, Former Director of the Central Institute of Economic Management, said that looking at some numbers, especially the GDP growth figure, it seems positive, but behind it also shows many problems, with A series of risks in the economy that have been accumulating for many years are still increasing.
Dr. Cung raises questions: Many people are optimistic with GDP in the first quarter increasing by 5.66% over the same period last year, this is the highest GDP increase of the first quarters in the past 5 years (from 2020 to present). So is this a good start or not, and we need to look closely at where this growth comes from, as well as how sustainable the growth is? Going into detailed statistics, we see industrial production and exports increasing, but is this a real recovery, and is the growth rate sustainable?
Dr. Analyzing the index of industrial production (IIP) in the first quarter of 2024 increased by 5.7% compared to negative 2.3% in the first quarter of 2023. Value added (VA) of the entire industry in the first quarter of 2024 is estimated to increase by 6.18% compared to 0.82% in the first quarter of 2023. Similarly, merchandise exports increased by 17% compared to negative 11% in the first quarter of 2023.
As for the PMI index (an economic index used to measure activity in the manufacturing and service industry) in 2023, only August is above 50%, other months are below 50%. By 2024, January and February were above 50%, but March fell below 50%. This signals a contraction of production.
“The service sector is considered the most hopeful driving force today, but is showing a clear and continuous downward trend, so will it still be the main driving force of growth in the near future? The financial market, currency, and banking system still have potential risks, and bad debts are increasing. Bad debt at the end of 2022 is 2.03%, in 2023 it is 4.55%, the on-balance sheet bad debt ratio by the end of January is 4.79%. The market has not been opened yet but bad debt is increasing, clearly there is a huge potential risk in the economy” – Dr. Cung said.
Private enterprises must truly be considered the dominant force. Only then can we regain high growth rate and achieve strategic goals. Economic growth cannot rely on the private economy, but on FDI, the economy will decline.
Dr. NGUYEN DINH Cung
“More worrying is that investment in society as a whole is very low. In particular, private investment – which accounts for nearly 60% of total social investment – is slowing down. This phenomenon has appeared in recent years, and so far we still do not see any momentum to increase in the near future.
Private investment usually has a growth rate of more than 10-15%, but in 2023 it only increased by 2.4% and in the first quarter it increased by 4.2%. Foreign investment has improved but project scale is getting smaller. The number of bankrupt and closed businesses is still increasing. In the first quarter of 2024, 36,200 businesses were born, but nearly 74,000 businesses left the market (an increase of 22.8% compared to the first quarter of 2023). Vietnam has never had a situation where the number of businesses leaving the market is greater than the number of businesses entering the market like now” – Dr. Cung emphasized.
If the economy wants to grow, it must have a turning point
Dr. Nguyen Dinh Cung emphasized: “It is necessary to clearly see and correctly evaluate the current state of the economy to clearly see the cause, from there to have the right and successful solution. The current economic situation in Vietnam requires strong breakthrough solutions to strive to achieve strategic goals.”
In the annual report on Vietnam’s economic situation, published by the National Economics University (NEU) on April 17, it also commented: Investment, exports and consumption are all weak. , with all three components weakening, showing a sharp decline in aggregate demand of the economy.
Aggregate demand plays an important role in determining the level of economic activity and employment in the economy. Decreasing aggregate demand shows that the economy is at risk of recession, which affects the overall growth of the economy, causing consequences such as decline in industrial production, increased unemployment, and reduced income. and people’s spending…
“The Government and relevant ministries, departments and branches need to urgently take appropriate and timely measures to strengthen the growth drivers from the aggregate demand side, thereby restoring aggregate demand and creating a premise for economic development. economics in the new context. In the context that the economic model has not improved in depth, to achieve the high growth target in 2024, it will have to rely mainly on aggregate demand policies. Therefore, the growth drivers from the aggregate demand side (investment, consumption, export) need to be recovered quickly and further promoted” – the report stated.
Sharing the same opinion, Dr. Nguyen Duc Hien, Deputy Head of the Central Economic Commission, said that to achieve the GDP growth target of 6-6.5%, restoring aggregate demand is an important task. He also pointed out that the current economic situation has points that need attention: Economic growth is mainly due to a sharp increase in public investment, but public investment does not play a leading role in private investment and is not yet widespread. as expected.
Besides, although there is a trade surplus, it is mainly due to the FDI sector, and because imports decrease more than exports. From those trade surplus factors, the question is whether the FDI sector is dominating the domestic economic sector, but the value-added content of the FDI sector contributing to the economy is disproportionate, and the trade surplus is Is that a good sign for the economy?
Concerned that the economy is going down, experts recommend that we must continue to improve the investment environment, have a clear message about a safe business and investment environment, and strengthen confidence in private investment. return. Continue to reform administrative procedures and substantially reduce business conditions that are barriers to production and business activities.
The government should continue to promote countercyclical fiscal policy, to boost aggregate demand and deal with the problems of growth slowdown. The government should continue to reduce some taxes and fees to support businesses to stimulate demand. Final consumption plays the largest role in aggregate demand, so it is necessary to have policies to stimulate consumption.
TRI HUMAN
