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COVER STORY

downwards, the number of new cases is
rising rapidly. Thus, in addition to con-
ECONOMIC STRUCTURE 2021
tinuing the accelerated vaccination pro-
gram, vigilance in social distancing, testing,
Sector Proportion (%)
and quarantining is important.
Agriculture, forestry, and fisheries 12.36 Secondly, positive outcomes in fiscal
consolidation and Vietnam’s effective pub-
Industry and construction 37.86 lic debt management over past years have
created sufficient fiscal space for the coun-
Services 40.95
try to respond to emerging fiscal needs
Tax minus product subsidies 8.83 from the pandemic in the short term.
Vietnam can afford a higher budget deficit
Source: General Statistics Office (GSO)
and increased public debt in the 2021-
2023 period to support its economy.
“However, in the longer term, when the
economy gradually recovers and the need
for fiscal support decreases, it is important
to expand the revenue base, strengthen
revenue management, and improve the
efficiency of State budget expenditures
to re-establish fiscal discipline within the
next 3-5 years, ensuring national financial
safety targets in the 2021-2025 period,”
said Mr. Jeffries.
On the fiscal front, according to the
WB report, going forward there is a clear
need to support private demand to help
and development of the digital economy Another equally important issue is how the domestic economy recover and con-
-
are considered breakthroughs in competing to effectively implement fiscal and monetary tribute to growth. Providing support to
with other countries in the region and the policies to stimulate growth and support impacted workers and households would
world. Mr. Jeffries said that digital trans- economic recovery in the period to come. be an essential avenue to achieve this objec-
formation is important to improve pro- Like most other countries around the tive. Given the available fiscal space and
ductivity by investing in education, tech- world, Vietnam has applied monetary poli- difficulties in implementing the budget in
nology, and innovation. “Covid-19 has accel- cies and used other policy tools, including 2021, the government may also consider
erated the adoption of digital technologies lowering interest rates, reducing borrowing revenue measures to support domestic
and sped up digital transformation,” he costs, and extending credit to people and demand. This could include a reduction in
added. “now, as digitalization has become businesses. However, this support is not value added tax (VAT) rates in 2022 to
an integral part of longer-term economic uniform because it only targets business support private consumption. Continued
recovery and a new vehicle for promoting activities relating to banks, which in Viet- close monitoring of the financial sector is
continued growth and innovation across nam have non-banking activities repre- also warranted.
many important economic and social sec- senting at least 50 per cent. Meanwhile, Thirdly, in the medium and long-term,
tors, Vietnam should use this opportunity monetary policy also has risks because it public investment should continue to be
to accelerate its own digital transformation is possible that money will flow into busi- one of the main drivers of growth. Invest-
across businesses and government and nesses that will go bankrupt or into those ment in sustainable infrastructure would
strive to reap its full benefits.” that cannot repay bank loans. Mr. Morisset bolster Vietnam’s post-Covid-19 recovery.
There also remain challenges for Viet- said that Vietnam needs to be more cautious Mr. Jeffries said that speedy disbursement
nam’s economic growth, of course. Mr. with the monetary policy implemented is therefore critical to ensure that its intended
Kelhofer said that Covid-19 will continue over the past two years. multiplier impacts will benefit the recovery
to be the major challenge in 2022, as the as well as support long-term growth.
world copes with the new Omicron variant PROPOSALS FOR GOVERNMENT Finally, according to the ADB, in the
and outbreaks continue. To create a greater impetus for economic implementation of health as well as eco-
Mr. Morisset also pointed to economic recovery in 2022, representatives from nomic solutions for recovery and normal-
risks because Vietnam is an open economy, international organizations also made a ization, there is a need for greater regional
so it will depend on the situation in many number of proposals for the government cooperation between countries and terri-
other countries around the world. to consider. tories and with international organizations.
Another risk relates to inflation. Vietnam’s Firstly, since this is a health-induced The divergence in the size and timing of
economy is currently facing import inflation economic crisis, health solutions play a support packages between countries and
because of higher prices for goods such as fundamental and decisive role while territories underscores the need for coor-
oil and the effects on international goods macroeconomic policies can complement dinated regional cooperation to minimize
movement, while commodity prices did them, according to the ADB. This means uncertainties and risks facing a recovery
not increase because demand was still lower that continued vaccinations and booster across Asia. Such cooperation is also impor-
than supply. “However, if demand increases, shots remain critically important. The tant to facilitate trade recovery and help
at some point the inflation risk for domestic WB report noted that the policy of living revive affected sectors such as tourism,
goods will appear and this requires that with Covid-19 will involve ongoing vigi- which require cooperation and alignment
authorities control inflation more cautiously lance and rapid action by authorities. on mobility-enhancing measures such as
than in the past two years,” he said. Although the fatality rate is trending vaccine passports. %

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