Vietnam fiscal deficit to reach seven-year high

The new deficit estimate of 5-5.1 percent of the GDP is well above the 3.44 percent threshold set by the parliament, according to a report by the National Assembly Economic Committee.

This would also be the highest deficit recorded since 2013, according to data from research company Fitch Solutions.

The deficit surge is a direct result of the government planning to pour VND300 trillion ($12.9 billion) into helping businesses and citizens overcome the pandemic’s impacts via tax breaks and electricity discounts, the report said.

Government income is set to be at least VND140 trillion ($6 billion) lower than earlier forecasts as oil prices plummet and tax collection drops as businesses are affected by the pandemic, it added.

The nation is also likely to miss its GDP growth target of 6.8 percent for 2020. The International Monetary Fund (IMF) has forecast a growth of 2.7 percent and the Asian Development Bank, 4.9 percent, the report noted.

It said the government needs to negotiate low interest loans from international organizations and find ways to cut spending.

The committee also said that businesses were facing difficulties in accessing the credit benefits the government has directed banks to provide.

Of over 354,200 customers eligible for loans with lower interest rates, only 22 percent have acquired them, with banks requiring them to provide guarantees and proof of cash flow, it said. This is difficult for them to do with revenues being slashed by the pandemic, businesses have said.

A VND62 trillion ($2.7 billion) plan to support workers affected by the pandemic has also faced delays in disbursement as authorities need time do identify and verify who should benefit from it, the report said.