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Vietnam’s growth can reach the target of 6.5%, but maintaining inflation below 4% is difficult to achieve.

3 risks affecting Vietnam’s economy in 2022

On April 25, the National Economics University (National Economics University) in collaboration with the Central Economic Commission and the Economic Committee of the National Assembly held a National Scientific Conference to assess Vietnam’s economy in 2021 and outlook for 2022, and at the same time, the University’s annual publication of Vietnam Economic Review 2021 was announced.

Accordingly, the theme of the Conference as well as of the 2022 annual research publication is “Vietnam’s economy in 2021 and prospects for 2022: Macro-economic stability and financial soundness in the context of the COVID-19 pandemic. -19”.

Presenting the report at the Conference, Assoc. Prof. Dr. To Trung Thanh, Head of the Scientific Management Department of the National University of Economics and Business, co-editor of the publication Vietnam Economic Review, said that in 2021, Vietnam will witness difficulties and challenges. unprecedented challenge. The world economy recovered but not evenly. In Vietnam, economic growth in 2021 will decline sharply to 2.58%, the lowest in the last two decades, from 2.91% in 2020 – the first year affected by the pandemic.

“The main cause is the severe recession shock in the third quarter of 2021 with the spread of the Delta strain while the vaccination rate is still very low, which has almost nullified efforts to prevent the disease and trace it. traces of the Government, which has been very successful in 2020,” Mr. Thanh said.

By 2022, a study by the University of Economics and Business forecasts that Vietnam’s economic prospects in 2022 may face many great challenges.

Firstly, the COVID-19 pandemic with the new strain Delta has a strong infection rate, escalating world political instability and a sharp increase in oil prices can make the path to global recovery and that of Vietnam’s major trading partners. South such as the US, EU, China are threatened; thereby affecting trade and investment in Vietnam.

Second, the fact that governments and central banks of major countries, especially the US, have moved to tighten monetary policy due to concerns about inflation, which has an impact on the world economy and finance in general and Vietnam in general. private. For Vietnam, the room for fiscal and monetary policies to support economic recovery will be narrower.

Third, instability risks still exist such as “hot” growth in the real estate and stock markets. Specifically, credit capital flows have not yet entered the production sector and poured into the asset market, causing financial risks; the banking system still has many unhealthy indicators such as declining credit quality and increasing bad debts; inflationary pressure increases, ….

“These risks can have a negative impact on the real economic sector, affecting the speed and quality of growth,” said Mr. Thanh.

Vietnam's growth can reach the target of 6.5%, but maintaining inflation below 4% is difficult to achieve - Photo 1.

Assoc. Prof. Dr. To Trung Thanh, Head of the Department of Scientific Management, University of Economics and Business, co-editor of the publication “Economic Assessment of Vietnam”, presented the research results at the Conference.

The driving force for Vietnam’s economic growth in 2022 still comes from the locomotive in the external economic sector

Mr. Thanh predicted that Vietnam’s economic growth has a high probability of reaching the target of 6.5% in 2022, but the government’s inflation target of less than 4% is unlikely to be achieved.

Mr. Thanh explained, the trend of increasing prices of basic goods and gasoline… plus the escalating war between Russia and Ukraine, has caused energy prices to rise to record highs, thereby greatly affecting production costs. domestic production, putting great pressure on inflation in 2022.

Besides, rising global inflation also affects domestic inflation pressure. Not only that, the ratio of money supply M2/GDP and credit/GDP of Vietnam is very high compared to other countries in the region, while economic growth is far below the potential output level, making increase inflation risk.

The report assesses that the high oil price movement in the first months of 2022 poses additional huge challenges to the economy. Until March 11, 2022, the average price of gasoline increased by 45.2% compared to 2021, and if according to the Draft reduction of environmental protection tax rates on gasoline, gasoline prices will increase by 41%. .

“If gasoline prices increase by 45.2%, the immediate direct impact on the consumer price index (CPI) increases by 0.6%, the producer price index (PPI) increases by about 2.34%. In this case The draft is implemented, gasoline prices increase compared to the average in 2021 by about 41%, directly affecting the consumer price increase by 0.5%; the producer price index increases by 2.2%”, Assoc.Prof.Dr To Trung Thanh said.

With the new epidemic situation and boosted by the new economic recovery support package, Vietnam’s economic growth can reach the target of 6.5% as expected. The driving force for economic growth still comes from the locomotive of the external economic sector, making a great contribution to the production of processed products and exports.

In addition, to compensate for the difficult private sector investment, which cannot recover quickly due to the impact of the pandemic, increased public investment will make a great contribution to the growth of 2022. Social security and employment support are implemented to help increase spending levels, contributing greatly to the size of the economy.

On the manufacturing side, the service industry has a chance to recover strongly in 2022 with the reopening of the economy. This is an industry that has played a large role in contributing to growth in recent years.

Besides, the growth quality in 2022 is also forecasted at a higher level, through the forecast of TFP growth and improved labor productivity.

On that basis, the report recommends, the Government needs to grasp three basic points of view when making policies. First, policies need to focus on how to recover and develop the economy sustainably in the context of “living with COVID-19”.

Second, to ensure the internal balance of the economy, output needs to be maintained near potential; It is necessary to implement short-term aggregate demand-oriented fiscal and monetary policies to push the economy back to its potential position.

“However, policy needs to be eased cautiously to avoid risks of macroeconomic instability,” the report noted.

Finally, policy space gradually narrows, policies need to direct priority resources to the business sector, creating conditions for the business sector to recover and develop during the pandemic; especially those that have great spillover effects on the economy.

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