Ho Chi Minh City's economy rises amid challenges

The economic growth figure for the first 6 months of the year in Ho Chi Minh City is estimated to increase by 3.55%. Although it is still at the forecast stage, the "economic locomotive" is showing signs of regaining growth momentum after a not-so-positive first quarter. The city is also placing high hopes on a special mechanism to help unleash social resources and create new momentum.

Positive signals

As early as 6am, some traditional markets in Thu Duc City were bustling with buyers and sellers. This is the peak time of the year, many stores sell a variety of fruits such as durian, mangosteen, rambutan, mango, Luc Ngan lychee...

Ms. Thu, a small trader in the market next to the Ministry of Public Security Apartment, said that fruits are in season so she imports them to sell every day, with abundant quantities and reasonable prices. Customers like to buy specialty fruits that are in full bloom, such as Luc Ngan lychees or rambutans from the West, and she sells hundreds of kilograms every day.

Not only in traditional markets, supermarket systems or shopping malls are also dedicating a lot of space to display specialty fruits that are in harvest season. Some large supermarket chains are also implementing stimulus programs with deep discounts on weekends to attract buyers. MM Mega Market supermarket sells Ri6 durian for only 70,000 VND/kg or Co.op Food sells Hoa Loc mango for only about 40,000 VND/kg.

The city continues to implement many programs to stimulate consumption, such as the "On the wharf, under the boat" Fruit Week in District 8, scheduled to take place in mid-June; or the "Fragrant flowers, sweet fruits of the Steel Land 2023" rural market in Cu Chi district...

The 2023 Southern Fruit Festival officially opened on June 1 (Photo: Organizing Committee).

Ho Chi Minh City's efforts to stimulate domestic purchasing power are undeniable. This is also reflected in the report of the Ho Chi Minh City Statistics Office with figures for the first 5 months of the year, total retail sales of goods increased by 9.4% over the same period. The growth in domestic purchasing power is considered a bright spot of the economy when export activities are declining. Some commercial and service sectors have positive changes, such as retail sales of household appliances increased by 6.5%; retail sales of phones, computers, and electronic components increased by 8.4%; travel services increased by 12%; accommodation and catering services increased by 7.9%...

Along with that, many other indicators of the city's economy also increased. The index of industrial production (IIP) in May is estimated to increase by 1.51% compared to the previous month and by 5.45% over the same period. The index of industrial and construction production showed signs of increasing again in April and May, after a period of negative growth in the first quarter. The production index of industries such as pharmaceuticals, mechanics, electronics manufacturing, food and beverage... all increased.

Regarding the real estate industry, Ho Chi Minh City also has many measures to remove obstacles, helping the market stabilize again. At the end of May, the Department of Natural Resources and Environment of Ho Chi Minh City announced the results of resolving 101 petitions related to 96 projects of enterprises in the city. Accordingly, 10 petitions have been completed; 73 petitions are being implemented; 7 petitions are being temporarily suspended; 2 petitions are not in accordance with current law; 2 petitions are not under the responsibility of this Department. Some projects of Novaland Group or Hung Thinh Group have been cleared, from which enterprises announced to restart construction, promising to bring new supply to the market.

The real estate market in Ho Chi Minh City has achieved some results in removing obstacles (Photo: Khong Chiem).

Many other real estate companies also said that the amount of products sold was higher than the previous period, "continuously" closing deals. Nam Long Investment Company said that from the beginning of the year until the end of mid-May, it recorded sales of VND448 billion from the Mizuki Park, Akari City (HCMC) and Waterpoint (Long An) projects. Or An Gia Real Estate Company continued to sell products and then hand over pink books to residents at the Westgate (HCMC) and The Standard (Binh Duong) projects. "The market has improved a bit," said a representative of a real estate company.

Disbursement of public investment capital has improved. In May, Ho Chi Minh City disbursed VND6,611 billion, the highest in the past year. In the first 5 months, the city disbursed VND9,086 billion, fulfilling nearly 13% of the plan assigned by the Government.

Forecasts and expectations

The Ho Chi Minh City Statistics Office estimated that in the second quarter, the city's economic growth rate reached about 5.87%, 0.15 percentage points higher than the same period last year. Of which, the service sector increased the highest, at 7.16%; the construction industry increased by 4.77%...

From that, the Department estimated the economic growth rate in the first 6 months increased by 3.55%, 1.47 percentage points higher than the same period. The main growth pillar was in the service sector (up 4.96%), contributing 89% to the GRDP growth rate.

This unit assessed that the 5-month data showed that Ho Chi Minh City's economy had positive changes, creating a premise for growth in the last 6 months of the year.

However, many experts believe that the figure is "just a forecast". Dr. Can Van Luc, Chief Economist of BIDV and Member of the National Financial and Monetary Policy Advisory Council, said that the forecast data of the Ho Chi Minh City Statistics Office "is just a forecast, like many other forecasts. The issue is whether it is feasible or not, which depends a lot on the city's efforts, not that a forecast like that will be like that".

According to Mr. Luc, this is data for reference only and should be compared to the low base level of last year. He noted that Ho Chi Minh City has many positive signals related to real estate, finance, the business sector, and the accelerated disbursement of public investment capital... but it is clear that there has not been a faster, stronger, or more drastic breakthrough.

Economist, Dr. Dinh The Hien said that since the end of 2022, although many people expressed optimism, experts all believe that the financial and economic markets in 2023 will develop badly due to inflationary pressure, increased interest rates, and corporate bond maturity in the first and second quarters of this year. It was not until the first quarter that the market realized the difficulties when exports decreased but the domestic decline was even stronger. During the 2008-2011 global economic crisis, domestic exports also decreased but did not decrease domestically as it is now.

Exports declined in the first months of the year in Ho Chi Minh City (Photo: Khong Chiem).

Experts also acknowledged that in the first months of this year, pessimism weighed heavily on businesses. Meanwhile, the world macro has shown bright spots but businesses are still not convinced, such as the European economy has recovered, overcoming the problem of high raw material prices, creating new export signals for Vietnam... "From the fourth quarter of 2022, I think bank interest rates will cool down in the first quarter and stabilize in the second quarter of this year. Now, the signal of stability is ready, the economy in 2023 will be V-shaped, opposite to last year," said Mr. Hien.

The positive macro signals above have impacted the economy of Ho Chi Minh City. According to Mr. Hien, the decrease in interest rates has helped consumption recover and production restart. The number of international visitors to Ho Chi Minh City is recovering rapidly, but if Vietnam announces the end of the epidemic, this number will increase even faster. He expects that in the fourth quarter of 2023, Vietnam will fully open to tourists, thereby stimulating the recovery of Ho Chi Minh City's trade and services - industries that are recording positive growth signals in the first 5 months of the year.

Regarding real estate and construction, Mr. Hien said that this sector is important to the city's economy but is not the only indicator to evaluate growth. In the second half of the year, real estate and construction cannot have positive changes due to many legal issues, debt settlement... and can only recover gradually. The expert emphasized that developing production and trade services is the core of Ho Chi Minh City in the following months.

Need to be more drastic and breakthrough

Dr. Can Van Luc said that even if the forecast growth rate for the first 6 months is 3.55%, it will still be a challenge for Ho Chi Minh City to achieve the annual target of 7-7.5%. He said that Ho Chi Minh City needs a more drastic and breakthrough to achieve this goal.

On the other hand, Dr. Dinh The Hien is optimistic about the forecast results for the next 6 months, there is no reason why Ho Chi Minh City cannot achieve its annual target. He has high expectations for the trade and service sector, when tourism is opened, more international visitors will come to Ho Chi Minh City. This will also reduce the situation of a series of empty stores on the golden streets that the press has been reporting loudly recently.

Ho Chi Minh City needs drastic solutions to boost the economy (Photo: Khong Chiem).

Looking frankly, the Ho Chi Minh City Statistics Office also noted that the export situation of Ho Chi Minh City continued to be difficult in the first 5 months of the year when key markets had not recovered. State budget revenue decreased by 4.5% compared to the same period, estimated to reach 43% of the estimate in the first 5 months.

From now until the end of the year, according to the leader of the Ho Chi Minh City Statistics Office, the city needs to continue to focus on implementing many solutions such as supporting businesses, curbing inflation, accelerating the disbursement of public investment capital, and removing difficulties for the real estate market on both the supply and demand sides. At the same time, the city has solutions to improve the efficiency of connecting labor supply and demand; strengthen investment promotion, replace and supplement traditional import and export markets that are facing difficulties...

On June 8, the National Assembly will consider a draft resolution on piloting a breakthrough mechanism for Ho Chi Minh City's development. Speaking at a group discussion at the National Assembly on the afternoon of May 30, Chairman of the Ho Chi Minh City People's Committee Phan Van Mai stated that this time, the policy mechanisms focus on unlocking social resources: Social investment resources through the forms of PPP, BOT, BT... or mechanisms to help Ho Chi Minh City mobilize resources through bond issuance... Mr. Phan Van Mai believes that if these mechanisms are well implemented, Ho Chi Minh City will mobilize hundreds of thousands of billions of VND for development investment in the next 5 years. This will become a new driving force for Ho Chi Minh City and the country.

Also in this discussion, Minister of Planning and Investment Nguyen Chi Dung said that there are many opinions saying that Ho Chi Minh City is wearing a shirt that is too tight, and needs to be loosened immediately for the city to develop. Therefore, the policies designed in the draft resolution on piloting a breakthrough mechanism for Ho Chi Minh City's development will be put forward by the National Assembly to help Ho Chi Minh City have more resources, autonomy, decentralization and help the city develop strongly and appropriately.

Content: Khong Chiem

06/07/2023

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