Adjusting growth targets

Friday, 2020-05-29 09:56:39
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According to economic experts, the adjustment of GDP growth target and relevant macro targets in accordance with the new developments of the domestic and international socio-economic situation will create favourable conditions for the Government in its management work. (Illustrative image)
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NDO – During the ninth session of the 14th National Assembly, the Government officially proposed that legislature consider to adjust some growth targets for 2020, including GDP growth, State budget revenue and public debt.

In addition, the Government cautiously recommended the NA consider and adopt the guideline on several specific mechanisms and policies to revive the economy in the new situation. Accordingly, the Government asked for the NA’s permission to proactively adjust the 2020 public investment plans among ministries, sectors and localities within the expenditure estimate on development investment; convert the investment mode for important transport projects from that of a public-private partnership to the use of the state budget; exempt and reduce a number of tax obligations concerning the areas and subjects suffering heavy losses due to COVID-19; postpone the increase of basic salary for civil servants, public employees and the armed forces and pensions from July 1, 2020; and consider launching new economic stimulus packages if the pandemic continues to be prolonged on a global scale.

According to the NA-assigned targets, Vietnam’s GDP growth rate in 2020 will be 6.8% while inflation will be kept below 4%. However, the unexpected outbreak of COVID-19 in more than 200 countries around the world has made this goal a major challenge which, as assessed by the Government, is difficult to be achieved. Given that fact, the proposal to adjust the growth targets is necessary and consistent with objective reality, looking directly at the socio-economic situation and forecasting the international and domestic situation in the near future. Under the Government’s updated scenario, the country’s GDP will grow by about 4.5% in 2020. The Government has also set a higher growth target of 5.4% in the event of a favourable global situation, with the disease being put under control and the global market recovering. Meanwhile, the consumer price index (CPI) for the whole year will rise by 4% on average; total state budget revenue will see a reduction of VND163 trillion (US$7.04 billion) compared to the assigned estimate; state budget deficit will be equal to about 4.75% of GDP; and public debt will equal 55.5% of GDP. The two targets for state budget deficit and the debt-to-GDP ratio will increase by 1.31% and 3.2%, respectively, compared to the initial targets. In the context that the global economy is predicted to fall into a more serious recession than previous crises, the Government’s growth target of over 5% holds great significance. It is not only a sufficient threshold to deal with employment for workers, maintain people’s quality of life and ensure social security, but is also a needed level to fulfil the average growth target of 6.5. % set for the period of 2016-2020. However, the enclosed risk is that adjusting up the budget deficit will lead the nation to borrow more, thus influencing public debt and, furthermore, this may affect the maintenance of macroeconomic stability – a very important foundation that Vietnam has achieved in the past ten years. This is the most disturbing problem.

The adjustment of socio-economic targets is a big and unprecedented issue, because the targets set in the NA’s Resolution are concretised from the Resolution of the Party Central Committee. On the basis of the Government’s proposal, the decision on the adjustment of growth targets will be made by the competent levels, with the current political and legal bases taken into account. According to economic experts, the adjustment of GDP growth target and relevant macro targets in accordance with the new developments in the domestic and international socio-economic situations will create favourable conditions for the Government in its management work, towards realising the dual goal of successfully combating the pandemic and reviving the economy after the disease.