Mr. Jonathan Ostry, Deputy Director of the Asia and Pacific Division of the International Monetary Fund (IMF) discussed the issue of improving Vietnam’s growth quality to ensure sustainable development.
Mr. Jonathan Ostry, Deputy Director of the Asia and Pacific Division of the International Monetary Fund (IMF).
– Vietnam’s economy grew 2.91% in 2020 and 4.48% in the first quarter. How does the IMF evaluate these results? What recommendations does the IMF have to help Vietnam achieve its growth target this year?
– In 2020, 2.91% is a rare positive growth number in the context of negative growth in most of the world economies. This achievement is largely due to extremely proactive, effective disease prevention policies that were in place very early in 2020, and the results really show what can be achieved with a response to strong health.
For 2021, the IMF forecasts that Vietnam’s growth will be very positive, at 6% or 7%. The message that we want to convey is that Vietnam needs to ensure that it continues to support vulnerable people in the economy as it has been, and at the same time continues its vaccination program. Please have just been started across the country.
Vietnam needs to lay the foundations for strong growth in the medium term, including securing tax and revenue sources to build infrastructure and deploy public investment; ensuring the resilience of the country’s financial system and continuing efforts to build an investment environment.
– In an effort to promote economic growth, with a target of about 6.5% this year and boosting domestic production, the Government of Vietnam is working on a new plan to help businesses escape the difficulties caused by Covid-19. In your way, what solutions should be implemented in this plan? If fiscal policy easing is relaxed, is there any risk of high inflation?
Vietnam’s current fiscal position is stable, supported by sustainable debt dynamics. Furthermore, inflationary pressures have been eased and in line with the State Bank’s limit for 2021 of 4%. The IMF’s recommendation is to loosen the fiscal policy, if needed, to support economic activity and limit the negative impact caused by the pandemic. Of course, the policy adjustment largely depends on the rate of economic recovery at the volatile global level.
The imposition of tax deferrals in Vietnam is not strong enough, especially in the sectors most heavily affected by the economy, may not be of much use. We recommend the following measures: apply temporary corporate income tax to carry forward losses to improve cash flow of firms; better targeting temporary corporate income tax breaks to benefit small and medium-sized businesses that are struggling but can perform well; Provides interim provisions for rapid depreciation or investment tax credits to reduce the cost of user capital and encourage investment.
– How does the IMF evaluate the quality of Vietnam’s economic growth? How does growth quality affect the capacity building to attract foreign direct investment (FDI)?
– The story of Vietnam’s growth over the past three decades is remarkable, because it is a sustainable and inclusive growth that helps promote people’s living standards. Thanks to market-oriented reforms, improving business environment and helping to attract FDI significantly, Vietnam has turned from one of the poorest countries in the world to a low-middle-income country.
Viet Nam should take steps to further improve its business environment and ensure a level playing field. This includes reforms towards simplifying and reducing the legal burden faced by domestic private enterprises, reducing input costs and entering the market for businesses, continuing to reform state-run enterprises and strengthening good governance.
In addition, Vietnam needs to continue reducing the labor skills mismatch. Increased access to human resources and technology will also boost labor productivity, facilitating investment in more complex products that can better withstand competition in international markets.
Source: ndh.vn – Translated by fintel.vn