6-6.5% GDP growth target a significant challenge: Deputy PM

The 6-6.5% economic growth objective and the risk of rising inflation driven by domestic demand recovery have become "significant challenges" for Vietnam.

Deputy Prime Minister Le Van Thanh made the statement at the ongoing National Assembly session that kicked-off on Monday.

The socio-economy has achieved many positive and important results in all fields, including epidemic control, macroeconomic stability, security of the economy’s major balances, and the higher year-on-year growth rate of all major sectors.

However, consumer price index in April climbed by 2.09% from the end of 2021, nearly double the same period of 2018-2021. This exerts pressure on macroeconomic stability, inflation management, and the effectiveness of the government’s programs to support individuals and businesses, Thanh noted.

Vietnam's exchange rate is under pressure given growing U.S. inflation, the Federal Reserve’s interest rate hikes, the Russia-Ukraine war, and skyrocketing input import costs. Production and business activities continue to confront several challenges, like disrupted supply chains; fluctuation of input material costs, particularly gas and oil; and sluggish energy conversion.

Other potential risks are also recognized in stock, corporate bond and real estate markets, as well as the high dependence of export turnover on foreign-invested companies, according to a government report released at the legislative body's meeting.

State budget revenue rose by 15.4% year-on-year in the first four months of 2022, but revenue from production and business activities only increased by 5.4%.

"The development and improvement of institutions have lagged behind the socio-economic growth. Some aspects of the socio-economic recovery and development program are still being carried out slowly," the Deputy PM noted.

Nguyen Bich Lam, former head of the General Statistics Office, predicted Vietnam's inflation may surpass 5% next year due to supply chain inflation. Standard Chartered in April forecasted Vietnam’s inflation in 2022 and 2023 at 4.2% and 5.5% respectively, due to supply-side factors including rising commodity prices, especially given the current global geopolitical tension. However, the lender maintained its 2022 GDP forecast at 6.7%, as economic indicators recover on a large scale.

World Bank in April lowered Vietnam’s 2022 GDP projection to 5.3% due to challenges in terms of rising Covid-19 infections and the country’s vulnerability to external shocks driven by its high economic openness. This estimation is much lower than that of other international institutions.

ADB anticipated Vietnam’s growth rate to converge to its pre-pandemic level of 6.5% in 2022 and 6.7% in 2023 thanks to “high vaccination coverage, the shift to a more flexible pandemic containment approach, expanding trade, and the government’s economic recovery and development program.”

To overcome obstacles and maintain GDP growth of 6-6.5%, Deputy PM Thanh has outlined several solutions. The government must closely coordinate fiscal and monetary policies with other policies to maintain macroeconomic stability, guarantee major balances and control inflation.

It should be followed by market monitoring, pricing stability, promotion of trade, import and export, as well as effective solutions to sustain supply chain stability. The Deputy PM has advocated strengthening the management and supervision of the stock, corporate bond and real estate markers to ensure healthy, safe, and sustainable development.

He also asked for effective disbursement of public investment capital, as well as the expedited development of a synchronized strategic infrastructure system.

These include the government's goal of completing 361 kilometers of the North-South Expressway eastern section phase 1 by the end of 2022; and the simultaneous commencement of 12 component projects of the North-South Expressway eastern section phase 2 as well as Long Thanh International Airport's terminal and runways in the fourth quarter of 2022.

The government expected to operate numerous projects in late 2022, including four component projects of the North-South Expressway eastern section constructed during the 2017-2020 period, namely Mai Son-National Highway 45, Cam Lo-La Son, Vinh Hao-Phan Thiet, Phan Thiet-Dau Giay, as well as the Thai Binh 2 thermal power plant.