Macro stability, confidence in the face of difficulties

Prof. Dr. Tran Tho Dat, former Rector of National Economics University, discussed with PV. VietNamNet around the importance of stabilizing Vietnam’s macro in the context of many worrying signs.

Controlling the ‘unruly horse’

In the past time, especially in the past 5 years, one of the Government’s great efforts has been to maintain a stable macro-economy. For the economy to grow quickly and sustainably, the fundamental factor is macroeconomic stability. Our macroeconomic indicators in the past few years have been highly appreciated, such as the index of inflationary less than 4%, foreign currency reserves increased 10 times in the past 10 years… That is one of the factors creating sustainability in growth.

Although Vietnam’s growth has not yet broken through, it is quite stable. Rarely has GDP growth been faster than inflation. It is the foundation of macro stability that has been established over the past 10 years, so despite the great impact of the pandemic, Vietnam’s economy still achieved positive growth year-on-year.

That said, ensuring macroeconomic stability is very important. Ensuring macroeconomic stability requires constant efforts. Because, once macro stability is broken, it will be devastating very quickly. Once people and businesses have lost their faith and have lost their confidence, much of the credit for stabilizing the macro will go away very quickly.

For example, the extremely unusual fluctuations of the financial market in Vietnam over the past time also say that one thing is kept macro stability how difficult. Because, once the stability is lost, it will be out of control. Like an economy with an inflation rate exceeding a certain threshold, inflation will become an uncontrollable horse in an instant. Inflation tends to increase, which will generate expected inflation. Such consecutive inflation waves will disrupt macro stability.

At that time, investors will lose confidence in the economy. An economy without investment clearly has no growth engine. Declining investment reduces growth momentum. Therefore, maintaining macroeconomic stability is a valuable lesson.

Macro stability lessons from financial markets

Currently, capital in the economy is still mainly based on banks, accounting for about 90-95%, this is an inadequacy and a weakness of Vietnam’s financial market compared to other countries. That said, we have to develop other fundraising channels like corporate bondsshares.

The development of the financial market will help businesses operate healthily, have the need to issue stocks and bonds to the public, take credit to invest in effective production and business activities. If the bond and stock markets lose confidence, then we lose a tremendous amount of room to develop the capital market.

The potential for Vietnam to develop the bond market and the stock market is still very large. The proportion of our bond market is still very low compared to the region and the market share also. The number of investors is very large, but the size of the stock market is still very low compared to the proportion of GDP.

We’re making financial markets healthy, but not squeezing. The measures taken must send a clear message that the Government always nurtures and promotes a healthy financial market. This is also a balancing problem between developing it and controlling it for the market to develop. In order to grow healthy, there must be control. Control means that from the very beginning, when problems arise, there must be a detection mechanism.

For example, for corporate bonds, not all enterprises can issue corporate bonds, but must have an enterprise credit rating, must have an enterprise credit rating organization, and enterprises must have certain standards to be eligible to be approved. release Stock. The same goes for issuing shares to the public. Must require listed companies to report according to certain standards, regularly monitored. Looking at the volatility of the stock market, we can easily guess which stocks are driven and which are not.

In fact, over time, the authorities have been loose and have not fully confirmed the supervisory role, so that the defect is too big. After that, the management agency introduced tightening measures. The stable financial market should have been without drastic fluctuations. Due to poor control, the market grew “hot” and then dropped very quickly. The variance and volatility of such financial markets are enormous. Stabilizing macroeconomics is to make its variance smaller.

In general, the macroeconomic stability over the past time, not to mention other indicators, only talking about the financial market, we see that this market has abnormal fluctuations and huge variance. Such volatility will reduce investor confidence and that is a lesson to note in stabilizing the macro in the coming time.

Luong Bang (write the)

By all measures to maintain macro stability, ensure major balances, drastically promote rapid recovery and sustainable development.

On April 4, Prime Minister Pham Minh Chinh chaired the regular Government meeting in March 2022.