Boosting domestic consumption to achieve 8% growth target

Domestic consumption is playing an important role in maintaining economic recovery and growth. In the first quarter of 2025, the service sector grew by 7.7%, contributing more than 53% to GDP growth - the highest level since 2020. This reflects that domestic demand is gradually recovering.

The Ministry of Finance ’s report shows that the significant increase in consumer demand during holidays and Tet, along with the sharp increase in international visitors to Vietnam, has positively supported the trade and service sector. However, Minister of Finance Nguyen Van Thang frankly assessed that this improvement is still slower than expected.

Illustration photo. (Source: Internet)

Total retail sales of goods and consumer services revenue in April 2025 increased by 11.1% over the same period, bringing the increase in the first 4 months of the year to 9.9%. This is a positive figure, but it has not met the annual growth target of 12% set by the Government . If this threshold is not reached, the ability to complete growth scenarios above 8% will face many challenges.

Among the solutions to boost the socio-economic situation, the Ministry of Finance proposed focusing on developing the domestic market, perfecting tax and credit policies to increase purchasing power, encourage consumption and stimulate domestic tourism. At the same time, it is necessary to promote activities connecting supply and demand and trade promotion to achieve the target of retail sales growth of goods and services reaching at least 12% this year.

Nguyen Ba Hung, chief economist of the Asian Development Bank (ADB), said that promoting domestic consumption is reasonable in the context of international trade instability. According to him, investing in infrastructure, technological innovation and improving the quality of domestic consumption will create a driving force to increase the competitiveness of the Vietnamese economy.

One of the key solutions being proposed by the Government is to continue reducing the value-added tax (VAT) by 2% and expanding the scope of application. According to the report presented to the National Assembly by Minister Nguyen Van Thang, authorized by the Prime Minister, the reduction will be applied from July 1, 2025 to December 31, 2026.

This policy applies to groups of goods and services currently subject to a 10% tax rate, except for sectors such as telecommunications, finance - banking, securities, insurance, real estate, metals, mining (except coal) and items subject to special consumption tax such as gasoline.

According to the Ministry of Finance's analysis, in the three years from 2022 to 2024, the VAT reduction policy has brought significant benefits with a total support value of about VND 123,800 billion. As a result, domestic consumption has recovered significantly: increasing by 19.8% in 2022, 9.6% in 2023 and 9% in 2024. Economic growth in 2024 will also reach more than 7%, with all 15 socio-economic targets meeting or exceeding the plan.

Minister Nguyen Van Thang said that the VAT reduction policy has helped businesses reduce product prices, indirectly boosting people's consumption, thereby creating more jobs and supporting growth. He emphasized that continuing this policy is necessary to maintain the momentum of economic recovery.

The Government's proposal has received consensus from the National Assembly's Economic and Financial Committee. Chairman of the Committee, Mr. Phan Van Mai, affirmed that in the context of many difficulties in the domestic economy and unpredictable developments in the international market, the VAT reduction policy is an effective measure to stimulate purchasing power and support businesses.

Agreeing with the above viewpoint, experts in the Asian Development Outlook 2025 Report of ADB also said that extending the VAT reduction policy until the end of 2026 is a positive step. Mr. Shantanu Chakraborty, ADB Country Director in Vietnam also recommended that in addition to reducing VAT, it is necessary to consider cutting income taxes, business costs and expanding social spending to create more momentum for the economy.

Domestic consumption is and will continue to be an important pillar in Vietnam’s growth strategy. In the context of an unstable global economy, promoting domestic purchasing power through tax support policies such as VAT reduction, along with measures to expand the market and invest in infrastructure, will help Vietnam maintain sustainable growth momentum and reach the target of 8% in 2025.

According to Environmental Economics Magazine

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Source: https://thoidai.com.vn/day-manh-tieu-dung-noi-dia-de-dat-muc-tieu-tang-truong-8-213659.html