Prospects for economic and financial growth in 2020

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Workshop on "Vietnam's economy - finance in 2019 and prospects" was held by the Ministry of Finance on the morning of December 25.

Capital flows to Vietnam not as expected

Speaking at the conference, Bui Ngoc Son, Institute of World Economics and Politics, said the world economy in 2019 witnessed many events such as the US-China trade war, the chaos from Brexit, fears of a recession, and even a global economic and financial crisis in 2020.

In this context, the US-China trade war is a factor considered to have had a strong impact on Vietnam's economy. Early in the year, it was expected Vietnam would become a strong attraction for FDI inflows from China and would benefit from this. But reality shows the benefits from this direction are not great.

According to Bui Ngoc Son, when the trade war began, inflows of FDI from Western investors shifted from China to other countries to avoid the US-China trade war but Vietnam did not receive much.

“The reason is because Vietnam lacks a strong supporting industry, has poor infrastructure, weak logistics and high costs. Meanwhile, countries like Thailand, Indonesia and Malaysia have these advantages and tax policies to attract FDI inflow. Therefore, this capital in Vietnam tends to decrease while it tends to increase rapidly in the above countries. For example, FDI registered capital in Thailand increased by 69 percent in the first nine months of 2019. FDI inflows to Indonesia in the same period also jumped 17.8 percent (excluding capital into banks, oil and gas), the highest ratio in four years,” Son analysed.

Notably, Vietnam is also suffering many negative effects from the US-China trade war. The increase in Western orders has shifted from China to small while Vietnam is losing competitiveness, being annexed and being taken advantage of for trade.

Need to restructure State budget revenues and expenditures

To complete the final year plan of 2016-2020 and prepare to enter 2021-2025, paving the way for 2021-2030, based on forecasts of economic fluctuations of the world financial - monetary market and on the capabilities and conditions of the Vietnamese economy, the National Assembly approved 12 basic targets for 2020. Of which, total domestic products (GDP) increased by 6.8 percent; the average price growth rate (CPI) is below 4 percent; total export turnover increased by about 7 percent; the ratio of trade deficit to the total export turnover is below 3 percent; total development investment capital of the whole society is about 33-34 percent of GDP.

According to Assoc.Prof. Dr. Dinh Trong Thinh, Finance Academy, these are considered relatively high and quite challenging goals in the context of global economy and domestic economy facing many difficulties and risks. Therefore, to promote fast and sustainable economic growth to achieve the targets set in 2020, macroeconomic stability, inflation control and balances must be maintained, creating a foundation for rapid and sustainable development.

“In particular, it is necessary to closely monitor the fluctuations of the world economy and the financial - monetary market, take initiative, actively manage and adjust the exchange rate flexibly, in accordance with the development of the economy, gradually stabilising and raising the value of Vietnamese dong. Monitoring, managing and monitoring fluctuations in the real estate market and stock market to take measures to timely adjust to avoid abnormal fluctuations that adversely affect the economy," Assoc. Prof. Dr. Dinh Trong Thinh said.

Many experts also said that the Government also needs to strengthen inspection and supervision of price and market activities, ensuring price stability. There is a need to restructure State budget revenues and expenditures, minimise budget deficits, accelerate tax policy reform, restructure and enhance the efficiency of public spending, and reduce budget deficits, sustainable reduction of public debt and external debt to GDP.

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Experts from the Academy of Public Administration also emphasised the need to accelerate administrative procedure reform, implement a synchronised digital transformation in State management activities, implement e-government and the “single window” mechanism, continue to improve the investment, production and business environment, minimize the formal and informal costs in business registration, in market access activities, creating a fair and transparent environment among economic sectors, contributing to improving the competitiveness of enterprises and the economy.

Assoc.Prof. Dr. Dinh Trong Thinh said with the determination and efforts of all people and all economic subjects, the Government's resolute guidance and lessons learned in recent years, it can be trusted these targets will be fulfilled and exceeded by 2020.