Viet Nam's fiscal support package needs to contain the pandemic and minimise health and economic impacts, so it will be necessary to give priority to spending on health, social security and support for the business sector.

Chairman of the National Assembly Vuong Dinh Hue yesterday chaired the Vietnam Economic Forum 2021 in Ha Noi, where economic experts discussed and suggested fiscal and monetary policies to support socio-economic recovery and development after the COVID-19 pandemic.

The forum themed "Recovery and sustainable development" was co-organised by the National Assembly Economic Committee, the Central Economic Commission and the Vietnam Academy of Social Sciences, connecting 57 locations in the country and three international ones, gathering opinions from a large number of scientists and experts in various fields.

Hue said Viet Nam has used financial and monetary policies and other macroeconomic policies to deal with the pandemic over the last two years, adding the total size of the country’s fiscal and monetary support packages was estimated at about 4 per cent of GDP, lower than the average level of other countries in the world.

Hue told the forum: “The development is not at all costs, but must be sustainable. We have to pay attention to immediate and urgent solutions to maintain the growth drivers to control the pandemic, support recovery and economic growth.”

But, he said: “Short-term and medium-term solutions must always stick to the long-term goal of restructuring the economy, ensuring the economy's rapid but sustainable development, not only economic problems, but also the social and environmental issues, ensuring macroeconomic stability, and controlling inflation.”

“Important solutions must be how to mobilise resources, especially in the context that Viet Nam's medium and long-term capital market is still limited,” adding: “We will allocate resources to specific targets on the basis of international experience and the practical situation of Viet Nam,” Hue said.

He said the financial and monetary policy solutions and proposals made at the forum were not included in the one decided by the NA, but will be for additional financial and monetary frameworks.

In response, delegates of the forum said the pandemic was not just an economic-financial crisis and solutions in healthcare were crucial.

They said the objective of the fiscal support package was to contain the pandemic and minimise health and economic impacts.

Economist Can Van Luc forecast the local economy would face many difficulties in 2022, adding: “Without special programmes, Viet Nam may miss opportunities and fall behind.”

Luc said policy formulation must be feasible and implemented quickly and effectively and there must be good coordination between policies.

Regarding monetary policy, the economist said: “Viet Nam should continue reducing loan interest rates from 0.5 to 1 per cent. For example, if the housing loan proposal proposed by the Ministry of Construction is VND65 trillion (US$2.82 billion), the Government will need to spend about VND6.1 trillion on interest."

Luc said: “It is necessary to have a loan guarantee policy for small and medium enterprises through funds in the localities.”

Together with the Ministry of Finance’s loan support package of VND20 trillion - VND30 trillion, an additional investment of about VND150 trillion for key infrastructure projects and work, as well as other packages for healthcare and social security, Luc estimated the fiscal support packages at VND278 trillion or 3.41 per cent of GDP in 2021.

In the long term, fiscal measures should gradually shift from direct support to indirect support, from financial support to mechanism support, in a way that promotes innovation, digital transformation and green and sustainable growth, said Luc.

Nguyen Minh Cuong, Chief Economist of the Asian Development Bank in Vietnam, told the forum as the pandemic continues to affect the world and the appearance of new strains were potential risks to the global economy, adding: “The gradual narrowing of the fiscal and monetary policies of countries in 2022 will also gradually narrow the time for Viet Nam if the country does not quickly implement support policies, especially in the short term."

Francois Painchaud, a representative of the International Monetary Fund (IMF) in Vietnam, said it was necessary to focus on spending instead of tax reduction or postponement measures.

He said: “Increasing public investment, as well as supporting private investment to encourage businesses to invest, is needed to meet the challenges of the fourth industrial revolution."

Nguyen Duc Khuong, deputy director in charge of research at IPAG Business School, Paris, said the innovation ecosystem will be a space for creating a new generation of employees and operating processes and boosting productivity.

He said: “Support from the State and the Government needs to focus on human resource training, capital support, risk sharing with businesses, through helping businesses take strategic actions to respond to the challenges of changing business models, investing in technology and big data to understand and reach consumers better."

He added: “The challenge of digital transformation, digital services and shared platforms is all related to human resources.”

Bui Quang Tuan, director of the Vietnam Economic Institute, said Viet Nam’s competitiveness towards ASEAN countries was low while the investment in technology from the State budget was decreasing, while it was increasing in other countries.

Tuan said it was a golden opportunity for Viet Nam's digital economy at present, saying: “It is necessary to increase investment, invest in materials, invest in resources and improve and perfect institutions.”

Tuan said only with such investment would Viet Nam adapt to the changes that are happening very quickly.

In other sessions of the forum, delegates discussed practical solutions to help Viet Nam overcome difficulties and quickly recover after the pandemic.

Chairman of the National Assembly Vuong Dinh Hue said: “If policies, especially macro policies, do not match reality, the policy itself will be misleading.” — VNS