6.5 pct GDP growth target a major challenge: Deputy PM

By Anh Minh   May 23, 2022 | 03:15 am PT
6.5 pct GDP growth target a major challenge: Deputy PM
Containers are seen at Cat Lai Terminal in Ho Chi Minh City, December 24, 2021. Photo by VnExpress/Thanh Nguyen.
The 6-6.5 percent gross domestic product (GDP) growth target for this year could be a challenge due to rising inflation and global supply chain disruptions, the government has said.

The rising prices of imports, especially of gasoline and oil, and of transportation, along with the shortage of workers and disruptions in imports from China, will have large impacts on the economy in this and next year, Deputy Prime Minister Le Van Thanh briefed the National Assembly at a meeting Monday.

Vietnam’s Consumer Price Index (CPI), which measures inflation, in April rose 2.09 percent from the end of last year, nearly double from the same period between 2018 and 2021.

This has created a huge pressure on stabilizing the macro economy and controlling inflation this year, and mitigated the effectivity of supporting policies to the people and businesses, Thanh said.

The Vietnamese dong is set to be weakened by rising inflation and policy rates in the U.S., the prolonged Russia-Ukraine crisis and surging import prices, he added.

Manufacturing and businesses face many difficulties while exports are heavily dependent on foreign direct investment companies, while the markets of stock, corporate bonds and real estate contains many risks, the Deputy PM said.

Delays in public investment disbursement and implementing recovery programs, along with "passive and negligent" management among authorities also pose development challenges, he added.

"In the face of domestic and international developments, it's a huge challenge to realize 2022 targets, including a target for an economic growth of 6.0 percent to 6.5 percent."

The government earlier this year had identified economic recovery as the key goal after two years of major disruptions due to the Covid-19 pandemic, with last year’s GDP growth hitting 2.58 percent.

The country has achieved initial success in the first four months, with government revenue rising 15.4 percent year-on-year in the first four months to VND657.40 trillion ($28.38 billion).

Credit growth hit 17 percent year-on-year from January to mid-May, and the country recorded a net surplus of $2.53 billion in the first four months, up 71 percent year-on-year.

A total 80,500 businesses were registered or resumed operation in the first four months, up nearly 27 percent year-on-year.

But the government needs to ensure growth and control inflation, lawmakers said.

Vu Hong Thanh, head of the National Assembly’s Economic Committee, said that the rise in key commodities, especially gasoline and oil, will have negative impacts on inflation.

Although the government has cut environmental tax on gasoline by half from April 1 until the end of the year, it should consider reducing special consumption tax on this commodity to prepare for a large fluctuation in global prices, he said.

"The government needs to pay attention to the risks of importing inflation from other countries as material prices have been surging."

Thanh added that the delays in approving certain plans, like Power Development Plan 8, has led to a delay in many electricity projects and this increases the risks of power shortages during the high-demand season.

Another contributing factor to the power shortage threat is the 1.36-million-ton shortage of coal in the first quarter, he said.

Thanh also expressed concern over delays in public investment as only 16.4 percent of the total target was disbursed in the first four months.

The government has not submitted to the National Assembly details on how it plans to use the economic stimulus package to recover the economy.

"This delay reduces the effectivity of the economic recovery program."

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