The COVID-19 pandemic caused many economic activities to stall, causing the State budget revenue to decline, while the need to spend on prevention and overcoming of the epidemic increased.
Monetary policy must balance growth targets and control inflation, reducing the risk of asset price bubbles
Avoid inflation risk
However, Vietnam cannot pursue macro policies in the same way as other major countries in the world because monetary policy is tied to inflation and exchange rate targets. Large-scale monetary easing can lead to domestic currency devaluation, the investment environment becomes more risky and delay foreign investment inflows into Vietnam.
Responding to reporters, Assoc.Prof.Dr. Pham The Anh, chief economist of the Institute for Economic and Policy Research (VEPR), said that inflation will tend to rise again, especially starting from April. Last year, the inflation trend decreased from April – May onwards due to blockade, so the decrease in consumption leads to lower consumer prices. This year is different, compared to the same period last year will increase again, the trend from now to the end of the year prices will increase. Therefore, the 6.5% growth target of the Government is ambitious. If monetary stimulus measures continue as last year, it is possible that consumer prices will not reach their target of less than 4% by year-end. Monetary policy must be balanced between growth target and inflation control, experts said. In order to achieve the growth targets set by the Government, monetary stimulus efforts may be required. However, monetary easing does not help stimulate private investment in the current context where COVID-19 remains, extending credit, expanding currencies can pose risks associated with inflation and asset price bubbles. Talking with the Business Forum, Finance Expert Phan Le Thanh Long also agreed with the above point. “Vietnam has experienced a lesson in the period 2011-2013 on monetary easing and inflation. Since then, there are huge differences in Vietnam’s macro policies, the Government is consistent in stabilizing. In the macro economy, the State Bank operates a monetary policy “flexibly but prudently”. “Therefore, macroeconomic stability should still be the top priority, preventing inflation and asset price bubbles in markets such as stocks and real estate. If real estate prices go up too high, young people, people with middle and low income will hardly have the opportunity to buy houses and stabilize their lives, ”said Mr. Long.
The right solution
According to the report on the assessment of the policy on pandemic response by the National Economics University and JICA, the Government should uphold the principle that when making policy is to stabilize the macroeconomy, No matter how long the epidemic lasts, many businesses are likely to go bankrupt.
Policies to support businesses need to continue to be implemented in the direction of more focused, right audience and more realism, closely following the needs of businesses It is necessary to keep inflation and interest rates low, stable rates, public investment to be carried out for the right purposes and good supervision, the investment environment improves, then after the epidemic, the economy recovers quickly. On the contrary, it will take many years to solve non-epidemic problems, the economy will stall for as long as the post-crisis period of 2007-2008. Policies to support businesses need to continue to be implemented in the direction of more focused, right audience and more realism, closely following the needs of businesses. It is necessary to select and classify occupations to support, on the basis of assessment and quick survey of the impact of COVID-19 epidemic. In which, industries are negatively affected in descending order, that is: tourism, transportation, textiles, footwear, retail, education – training. Regarding the conditions and criteria for enterprises to receive support, the Government can base on a number of key criteria such as spillovers and positive impacts on other sectors and fields; labor, create many jobs and have the ability to recover from a pandemic. In addition, public investment is still the main platform for economic growth in the coming time. While the demand for spending from the business sector and the people has fallen sharply, the State needs to play a major role in the expenditure. However, it is necessary to have the close supervision of the National Assembly to avoid negative consequences. Promoting public investment should not be a spread, hasty, uncontrolled increase in public spending. Vietnam should only accelerate projects, especially key national projects, that have been approved and have already been allocated capital for implementation. In addition to short-term responses to COVID-19, the Government needs to implement long-term solutions to prepare the basic conditions for sustainable post-pandemic development.
First, innovating the growth model in the direction of technology – innovating, taking a risk-taking mindset and encouraging entrepreneurship.
Second, take advantage of and exploit the advantages of the latecomers, increase the use of high technology through direct import, purchase and sale of copyrights, renting products from abroad and technology transfer from FDI.
Third, perfecting institutions, building a tectonic state, developing, integrity and acting through the balance of power within the State apparatus and the settlement of interest relations in accordance with the market economic conditions.
Fourth, develop an innovative, dynamic and creative private sector, ensuring equal business institutions for private enterprises.
Fifth, developing high-quality human resources through comprehensive reform of the education system, innovation of training programs towards increasing practice, developing multi-skill capacity, strengthening the connection between training institutions and markets, encouraging large enterprises to invest in education through public-private partnerships.
Source: enternews.vn – Translated by fintel.vn