Vietnam’s slowing economy faces big challenges: legislator

Prolonged global slowdown together with the credit crunch and other problems in the Vietnamese slowing economy may hinder Vietnam’s 2023 GDP growth target of 6.5%, a top lawmaker said.

At the opening session of the National Assembly (NA) in Hanoi on Monday, Vu Hong Thanh, head of the NA Economic Committee, said the country's economic growth must be at least 7.5% in each of the second, third, and fourth quarters to beat the set target as growth slowed down to 3.32% in the first quarter.

But it is hard to ramp up in the second quarter as slow growth remains because of several reasons, he noted. The current credit crunch and problems in issuing corporate bonds still hamper businesses, especially real estate developers.

Thanh noted that foreign direct investment (FDI), exports, and industrial production are on the decline. “The economy is facing a really tough time.”

A report by the committee shows that in the first four months of the year, nearly 79,000 enterprises were registered as new businesses or ones having returned to the market, meaning about 19,700 each month. However, around 19,200 enterprises left the market every month in the period. Many businesses had to sell their stakes or assets at very low prices and many acquisition deals had foreigners as buyers.

According to a Government report, lending rates in Vietnam still stand at high levels despite efforts to cut down, with the current average at 9.3%. However, National Financial Supervisory Commission data show that by the end of March, the average lending rate at 35 commercial banks in Vietnam was about 10.23%, 0.56 percentage points higher than that at the end of 2022.

Delivering a government report to the NA opening session, Deputy Prime Minister Le Minh Khai said the economy was facing difficulties, especially the manufacturing and construction sectors, and small- and medium-sized enterprises. Exports have been on the decline like the amount of orders from overseas markets.

The government has proposed 10 solutions to achieve this year's growth target, focusing on maintaining macroeconomic stability, controlling inflation, promoting growth, and ensuring balance for major factors in the economy.

The government also gives priorities to measures for exemption, reduction of taxes and fees together with extended durations to pay them; accelerating value added tax refunding; solving problems facing real estate projects, and supporting the recovery of cash flows for businesses.

The Deputy PM added that the government is also seeking to speed up disbursements for public-funded projects, with a target of spending at least 95% of the year’s target; to attract investment capital and promote public-private partnership projects.

Thanh, head of the NA Economic Committee, said the government needs to instruct the State Bank of Vietnam to continue cutting lending rates down, promptly fix issues in the electricity pricing scheme and improve regulations on trading petrol products. He asked the government to make supplementary reports on debts in the real estate sector.