The third quarter of 2023 has seen a positive trend in the economic growth rate with encouraging recovery month by month and consolidated confidence of businesses and investors.

Deputy Minister of Planning and Investment Tran Quoc Phuong mentioned, that the economic growth in the first two quarters of the year was estimated at only 3.72%, lower than the scenario set out in Government Resolution No. 01/NQ-CP. Production and business activities in various fields have faced difficulties, causing several enterprises to reduce production scale and cut output because of their eroded resilience after the COVID-19 pandemic.

A challenging growth rate of 6.5%

Enterprises are encountering big obstacles, including the shrinking market, negative cash flow and arising administrative procedures, which push up operating costs. Despite the reduction in interest rates, businesses still run into difficulty gaining access to capital. Credit outstanding only rose by 4.28% by July 27, while the rate was 9.44% in the same period in 2022.

In addition, the volume of corporate bonds issued fell by 78% over the same period last year. Administrative procedures in some areas remain cumbersome and complicated, while several mechanisms, policies and legal regulations have yet to be revised.

This situation is creating more challenges for the one-off payout of social insurance benefits and may pose certain risks to social welfare, as well as social order and safety. Whereas, the economic trend is gradually getting better. The index of industrial production (IIP) in July 2023 expanded by 3.9% over the previous month and by 3.7% over the same period last year. Vietnam posted a trade surplus of over 16.5 billion USD in the seven months and saw an increase in foreign direct investment after a series of consecutive declines in the first six months of the year.

The government has also continued solving outstanding problems, especially in the real estate market, corporate bonds, and investment projects to help promote cash flow, tap the resources of the economy and strengthen the confidence of businesses and investors.

“This result is thanks to the efforts of the entire political system, especially the direction and administration of the Government and the Prime Minister. Since the beginning of the year, the Government has issued many solutions to drastically and comprehensively deal with issues in all fields,” said Deputy Minister Tran Quoc Phuong.

Despite the gradual rebound of the economy, the Ministry of Planning and Investment assessed that there remain huge challenges in the last months of 2023 and the situation cannot be changed quickly in the short-term. The growth of the economy depends quite a lot on the general global trend, putting pressure on keeping a stable macro-economy and ensuring major indicators of the economy.

More breakthrough mechanisms needed

Amid the declining “health” of enterprises, it can be predicted that it will be a hard year to fulfil the growth target of 6%-6.5%. After the COVID-19 pandemic and the long-lasting negative effects of the world situation, the resilience of several businesses has reached the limit, according to Assoc. Prof. Dr. Tran Dinh Thien, former director of the Vietnam Institute of Economics.

The number of enterprises going bankrupt or suspending operations has soared rapidly since late 2022, especially small and medium-sized enterprises. The labour utilisation rate fell the most in provinces with advantages in processing and manufacturing industries, such as Binh Duong, Dong Nai, Thai Nguyen and Bac Ninh, posing many challenges to Vietnam’s industrial prospects.

Besides, foreign investment attraction has not recovered as before the pandemic, which also reduces one of the growth drivers of the economy. Assoc. Prof. Dr. Tran Dinh Thien said this is a particularly tough time for an open economy like Vietnam, requiring the re-identification of the economic structure to build more unusual solutions suitable for the new uncertain and unpredictable context. Achieving the 2023 growth target of about 6.5% is a difficult task, requiring great efforts and high determination of the administration at all levels and relevant sectors.

According to Assoc. Prof. Dr. Nguyen Duc Trung, Rector of the Banking University of Ho Chi Minh City, there must have breakthrough solutions to support the economy in the remaining two quarters of 2023, including unlocking resources and spurring private investment in important areas. It is also crucial to ensure the stability of the banking system and deal with bad debts, especially keeping the exchange rate stable to avoid imported inflation and create a stable macro foundation.

In addition, the management agencies must drastically diminish and simplify administrative procedures, as well as cutting business conditions. The Ministry of Planning and Investment suggested the promulgation of specific regulations to protect officials who dare to do and dare to take responsibility for the common interests.

The ministry also emphasised the task of promoting growth drivers including consumption, investment, and export, in addition to maintaining macroeconomic stability, controlling inflation, ensuring major indicators of the economy, strengthening social security, and supporting workers.

NDO