Vietnam’s fiscal deficit to hit 5-year high

The forecast followed the Vietnamese government’s announcement of a stimulus package to help businesses tide over the novel coronavirus crisis.

The figure, up from an earlier forecast of 3.4 percent, will be the highest deficit recorded since 2015, according to a recent release from the company, a subsidiary of credit rating firm Fitch Group.

Fitch Solutions revised its forecast after the government announced March 3 that it planned a VND27 trillion ($1.1 billion) package to help businesses cope with the coronavirus epidemic.

On March 6, the government said this figure could go up to VND30 trillion ($1.3 billion), including reduced tax rates and fees for affected businesses.

Fitch Solutions also revised its forecast on government expenditure growth from 7.4 percent to 8.1 percent, as it expects more spending on industries hard hit by the virus such as tourism, transport, electronics and agriculture.

It has lowered Vietnam’s revenue collection growth forecast from 4.1 percent to 3.2 percent, as corporate profits could face pressure amidst the epidemic. Tax breaks will also contribute to slower growth in government’s income, it said.

The Ministry of Planning and Investment last month estimated that the epidemic could cost Vietnam VND42.3 trillion ($1.82 billion) in lost budget revenues.

If the epidemic is contained by the end of the second quarter of the year, budget revenue for the year is likely to be VND1.47 quadrillion ($63.1 billion), down 1.6 percent from pre-epidemic estimates.

Vietnam’s 2020 GDP growth could fall to a seven-year low at 5.96 percent because of the disease, it has been reported earlier. Last year, growth reached 7.02 percent, second highest in a decade.