Prioritize consumer demand stimulus to achieve GDP growth target of 6.5%

	Strictly handling cases of not reducing VAT
	Does Vietnam still have room to stimulate consumer demand?

The purchasing power of the domestic market in the past 7 months has recovered relatively strongly, which is a positive light in the context of many other sectors facing difficulties. Photo: Thu Diu

Purchasing power has recovered but demand is still weak

According to data on the socio-economic situation in July and the first 7 months of the year just announced by the General Statistics Office, July is the peak month of the summer tourist season, so retail sales of goods and services are active, and revenue increased especially tourism. Specifically, the total retail sales of consumer goods and services in July were estimated at 512.2 trillion dong, up 1.1% over the previous month and up 7.1% over the same period last year. In the first seven months of 2023, the total retail sales of consumer goods and services at current prices were estimated at 3,529.8 trillion VND, up 10.4% over the same period last year (in the same period in 2022, 15.7%), if excluding the price factor, it will increase by 9.6% (in the same period in 2022, it will increase by 11.7%).

However, if calculated at current prices, the total retail sales of consumer goods and services in the first seven months of 2023 reached a higher scale but the growth rate was lower than the same period last year. In which, retail sales of goods in the first seven months of 2023 were estimated at VND 2,777.7 trillion, accounting for 78.7% of the total and up 9% over the same period last year. Specifically, food and food products increased by 12.9%; cultural and educational products increased by 10.1%; garments increased by 8.8%; household appliances, tools, and equipment increased by 3.6%; means of transport (except for cars) increased by 1.7%.

Revenue from accommodation and food services in the first seven months of 2023 was estimated at 377.3 trillion VND, accounting for 10.7% of the total and increasing by 16.3% over the same period last year. Tourism revenue in the first 7 months of 2023 is estimated at 18.6 trillion VND, accounting for 0.5% of the total and increasing by 53.6% over the same period last year because July is the peak month of the summer tourism season.

Notably, revenue in the first 7 months of 2023 of some localities had an increase over the same period last year such as Da Nang increased by 99.7%; Hanoi increased by 89.7%; Quang Ninh increased by 82.5%; Khanh Hoa rose 75.1%; Hai Phong increased by 68.1%; Ho Chi Minh City increased by 43.5%; Can Tho increased by 33.4%; Binh Duong increased by 21.3%.

According to the assessment of the Department of Domestic Market (Ministry of Industry and Trade), the purchasing power of the domestic market in the past 7 months has recovered relatively strongly, which is a positive light in the context of many other sectors facing difficulties. But overall, although purchasing power has recovered, demand is still weak, not reaching the level before the Covid-19 epidemic, and not stimulating production, investment, and consumption. Despite many difficulties, the market's purchasing power is gradually recovering in recent months, which will contribute to supporting businesses to restore production and business from now until the end of 2023.

Deputy Minister of Planning and Investment Tran Quoc Phuong also affirmed that, in the coming time, it is necessary to have solutions to direct and administer drastic, proactive, and coordinated coordination more closely, creating a positive impact on the community, maximize the effectiveness of policies and resources to support businesses and people, take advantage of every opportunity, take advantage of the time to recover growth and implement solutions in the medium and long term. In particular, it is necessary to remove difficulties, support production, business, and enterprises, promote growth drivers in terms of domestic consumption and investment (including the domestic private sector, state-owned enterprises, FDI attraction, and public investment), and export.

Increase the "dose" to stimulate consumption demand

In the context of government spending, total public investment is no longer maintained at a high level, export growth slows down, consumption markets shrink, inventories increase, many exporters still have to face a shortage of orders..., prioritizing domestic consumption demand stimulation is considered an important solution to replace the weakening growth drivers, thereby promoting economic growth in the last months of the year. More than ever, the consumption of goods in the domestic market must be stimulated by necessary support policies so that the manufacturing industry has room to develop, reduce difficulties in inventory, capital accumulation, and generate cash flow.

Talking to a reporter from Customs News, economic expert Vu Vinh Phu said that the reduction of VAT is a good "medicine" to stimulate spending, contributing to GDP growth since reducing VAT is helping to reduce direct costs for shoppers. Therefore, the reduction of VAT will stimulate consumers to shop more, and production and business enterprises will have better capital turnover. The 2% reduction in VAT on raw materials, spare parts, and equipment... also helps reduce production input costs, businesses have room to reduce product prices and share difficulties with consumers. It can be affirmed that this policy also helps businesses recover production and business. Besides, the reduction of VAT can reduce budget revenue, but in fact, the budget will increase revenue thanks to the recovery and development of production and business activities. The reality in 2022 has clearly shown that the 2% reduction of VAT has contributed greatly to the economic growth of 8%, and the tax revenue of the tax sector has reached over 124% of the assigned plan.

However, the above "dose" is still not enough, but it is necessary to increase the "dose" by many solutions to increase purchasing power for the market such as implementing a policy to stimulate domestic aggregate demand through tools from the state and businesses. Specifically, it is necessary to promote consumer credit to stimulate consumption demand. In addition, businesses need to accept discounts and stimulate the market. In the current difficult export context, if the domestic market is not promoted, it will certainly continue to affect inventories and production and business activities.

According to Assoc. Prof. Dr. Pham The Anh, Dean of the Faculty of Economics, National Economics University, in recent years, the State Bank has made great efforts to support the economy when continuously reducing interest rates. This helps the interest rate level in the first 7 months of the year to decrease compared to before. However, in terms of aggregate demand, production is still very difficult, reflecting the very poor absorptiveness of businesses, so reducing interest rates is not the most important point to support the development of aggregate demand.

“In the context of people's income decline, to stimulate consumption demand, it is necessary to lower interest rates further, because consumer credit is still high, borrowers are borrowing up to 13-14%. Therefore, in the coming time, the State Bank should continue to reduce lending interest rates for the economy," said The Anh.

To stimulate consumer demand, Nguyen Ngoc Thang, Co.opmart Operations Chain Manager cum Marketing Director of Saigon Co.op, said that this year, in the context of low market purchasing power, people tightened their grip. For spending, the People's Committee of Ho Chi Minh City has approved the organization of a focused promotion program "Shopping Season" from June 15 to September 15. The program is expected to create a push to stimulate shopping. Therefore, this program is deployed "bold" by businesses with many attractive promotional activities. For example, at supermarkets and retail stores of Saigon Co.op, in addition to periodic programs organized by Saigon Co.op, the system also cooperates with more than 1,000 suppliers to strongly respond to the joint program. of the city. Through the program, Saigon Co.op wishes to show the role of connecting production enterprises with consumers, promoting goods consumption, stimulating consumer demand, promoting production and business activities, and contributing to economic growth share. Not only Saigon Co.op, in order to stimulate shopping in the upcoming back-to-school season, hundreds of supermarkets, hypermarkets, and convenience stores of Ho Chi Minh City Union of Trade Cooperatives (Saigon Co.op) include Co.opmart, Co.opXtra... will also offer discounts from 20% - 30% for school supplies, clothes, school bags, etc.

It is forecasted that in the coming time, other areas of the economy such as import-export and investment will not end the difficulties. In that context, the domestic market with 100 million people is expected to continue to be a support when the external market faces difficulties, with a focus on key solutions such as stimulating purchasing power in the domestic market. It is necessary to help businesses boost production and business, and contribute to economic recovery.