There are different perspectives in the model of economic growth in Vietnam in 2021 proposed by domestic research institutes. However, it should be noted that there are key points that have been put forward by research institutes to recommend.
In a recent report on Vietnam’s economic outlook 2021, the Institute for Economic Research and Policy (VERP) has given two scenarios that are not too optimistic for Vietnam’s economy in 2021 with GDP growth at 5.5-5.8% (positive) and worse scenario is only 1.8-2%. While VERP is inclined to an optimistic scenario, it is based on a well-controlled epidemic. But even reaching the highest level set by this research institute, it still did not meet the National Assembly’s target for GDP growth in 2021 of 6.0%.
Before the report of VERP, Ph.D. Can Van Luc and a group of experts from BIDV Research and Training Institute have made an optimistic forecast for Vietnam’s GDP growth in 2021 with 3 baseline scenarios, positive-medium-negative. At a positive level, Vietnam’s GDP in 2021 may reach 7.5-8%, the base scenario (medium) is at 6.5-7% and in the negative scenario, GDP will grow from 4 to 4. 4.5%.
Share privately with Nhadautu.vn, Ph.D. Can Van Luc say the three growth scenarios mentioned above are all run by the BIDV Training and Research Institute based on fairly specific and accurate assumptions about the growth of each industry and field of Vietnam’s economy in 2021?
“Under the baseline growth scenario, Vietnam could reach 6.5-7% by 2021. This is entirely possible given that 2021 GDP growth is based on a low GDP growth base in 2020. With that is the fact that countries in the world can basically control the epidemic in the first half of 2021, vaccination is implemented as planned to gradually reduce the infection, partially restore the socio-economic activities in countries,” Ph.D. Can Van Luc emphasized.
With a more optimistic scenario, if the policies to support businesses and promote economic growth will be quickly issued and deployed by the government; the process of restructuring and digital transformation has been promoted; domestic and foreign investment to recover … GDP growth in 2021 of Vietnam may reach 7.5-8%.
Previously, in mid-January 2021, the Vietnam Economic Institute also launched models to forecast that GDP growth in 2021 of Vietnam could reach 5.49% (base scenario), 6.9 % (high scenario), and 3.48% (low scenario). However, the Institute of Economics said that the ability to achieve each scenario, in reality, depends on the world economic situation and the strengthening capacity to absorb foreign direct investment (FDI).
Before researches analyzing Vietnam’s growth model in 2021 from domestic research institutes are made, some international organizations such as IMF and World Bank have made optimistic forecasts about economic growth. the year 2021 of Vietnam. These forecasts all show optimism about Vietnam’s economy in 2021.
Specifically, the IMF forecasts that by 2021 Vietnam will grow by 6.7%, higher than Indonesia and Thailand, and lower than Malaysia and the Philippines; the World Bank also forecasts that Vietnam will grow by 6.7%, continuing to be the highest growing country in the region and the world.
What are the drivers and risks for GDP growth in 2021?
One of the reports that have fairly clear views on GDP growth in 2021 is that of VERP, which shows remarkable risks to the economy in the coming time.
Specifically, in 2020, Vietnam had a V-shaped growth, the lowest was in the second quarter of 2020 and started to grow again in the third and fourth quarter. In the fourth quarter alone, Vietnam’s economic growth reached 4.48% higher than Q3 / 2020 (2.62%). Overall, in 2020, Vietnam’s GDP will increase by 2.91%.
Factors that are believed to support growth are the government’s early control of the epidemic, helping maintain domestic economic activity, accelerating the disbursement and construction progress of key public investment projects, the wave of investment and trade shifts to disperse risks from the US-China trade conflict, stable macro environment, inflation being controlled at an acceptable level, and creation of the environment for the implementation of growth support policies.
Although there are different scenarios for Vietnam’s GDP growth in 2021, the research institutes believe that Covid-19 control will be the leading factor in affecting the GDP growth rate. Along with the ability to control the pandemics are the maintenance and effective deployment of support packages, creating an environment for businesses to survive and operate and create along with promoting the technology application.
The comments also said that the design of the first support packages is on the right track, but the policy implementation is ineffective, the administrative procedures are complicated and difficult to access. Therefore, it is important in 2021 to effectively implement the 1st support package, and then take the 2nd support into account.
Analyzing the difficulty in operating monetary policy in 2021, VEPR said that, in particular, it is very important to note that the asset bubble is forming on the stock market and the real estate market.
In fact, in 2020, property markets have seen significant growth, mainly because they are a refuge for the idle money of investors and households. This is understandable during a period of crisis. However, the continuous decrease in deposit interest rates due to the decline in credit demand is pushing the cash flow of savings out of banks faster and faster. In addition, when the price increases in the asset markets are large enough to produce a wealth effect, consumption will increase for non-essential goods.
“This led to the spillover of an increase in prices from the asset market to the consumer market, although slow, but perceptible. This is also a manifestation of the price increase when loosening monetary policy is pursued for a long enough time,” said the VEPR report.
Accordingly, a remarkable recommendation in the coming time is that, in all situations, macroeconomic stability, particularly inflation, interest rates, and exchange rates should be maintained. This is believed to be essential to prepare for the post-epidemic recovery period.
Diversification of import/export markets also needs more attention to avoid heavy dependence on a number of major economic partners.
One of the more noteworthy points is to focus on restructuring the economy and exploiting the domestic market, with priority to develop supporting industries as stated in the government’s Resolution 01/NQ-CP in 2021 to mastering a number of inputs that are both restricting imports, increasing the initiative in many different situations, creating jobs, and increasing connectivity among business sectors. Besides, it is necessary to have preferential policies (reducing taxes, fees …) to develop domestic production and trade to promote the domestic market.