Similarities in GDP assessment

In the Government report read by Prime Minister Pham Minh Chinh at the opening session of the National Assembly on October 23, GDP growth is forecast to strive to be only "above 5%" this year.

At the end of July, just three months ago, this target was still held steady at 6.5%. By early September, the Ministry of Planning and Investment had proposed three growth scenarios, in which, according to the most ambitious scenario, to achieve annual growth of around 6%, fourth quarter growth would have to increase by 10.6%, a high rate rarely seen in recent decades.

Thus, it is not surprising that the 6.5% growth target is out of reach. If GDP is adjusted downwards earlier or later, an economic expert analyzed, it will create a subjective mentality, reduce the initiative and determination in directing and operating, reduce efforts to implement policies and solutions to promote growth, and create negative psychology and public opinion.

The report on the review and assessment of the implementation results of the 2023 Socio-Economic Development Plan by the National Assembly's Economic Committee commented: "... The socio-economic situation of our country continues to recover positively, each month is better than the previous month, each quarter is higher than the previous quarter, basically achieving the set general goals and many important results in all fields".

“The macro economy is basically stable, inflation is under control, major balances of the economy are basically guaranteed; economic growth is recovering. It is forecasted that for the whole year of 2023, GDP growth will reach about 5%, although lower than the set target, it is still quite high compared to many countries in the region and in the world.”

Thus, the Economic Committee's report is quite in agreement with the Government.

6th National Assembly.jpg

National Assembly Chairman Vuong Dinh Hue chaired a working session on preparations for the question-and-answer session at the 6th Session of the 15th National Assembly on the evening of October 31. Photo: National Assembly.

For a long time, GDP has been a legal indicator because it is a measure of capacity and a tool to create jobs, reduce poverty and, most of all, narrow the development gap and lag behind other countries in the region and the world.

The World Bank's October 2023 report forecasts Vietnam's GDP growth this year at 4.7%, lower than the average growth of the East Asia-Pacific region forecast at 5.0% in 2023.

In Southeast Asia, Vietnam's growth (4.7%) is lower than Indonesia's (5%), the Philippines' (5.6%), and Cambodia's (5.5%). For many years, our growth rate has often been the highest in the region, but now it has slowed down.

Measure of the real economy

The GDP adjustment shows that the economy is still weak and the recovery ahead is quite fragile, as both domestic and international aggregate demand remains weak.

The business thermometer is the clearest. According to the Ministry of Planning and Investment, in the first 10 months of this year, the number of businesses withdrawing from the market was 146.6 thousand, up 20% over the same period last year, exceeding the total number of dissolved and bankrupt businesses in 2022, which was 143.2 thousand.

Many people say that bankruptcies and dissolutions of businesses are a manifestation of the "creative destruction" of the market because they will recover or switch to new industries when things are more favorable.

This situation is the result of both objective causes, when orders and purchasing power decline, and subjective causes with many policies that businesses have not anticipated.

For example, the State Audit pointed out: in a short period of time, the State Bank increased the operating interest rates twice (September 23, 2022 and October 25, 2022) with a total increase of 2%. This led to a sudden increase in deposit interest rates and lending interest rates across the system in the last months of the year. Deposit interest rates were over 11%, while lending interest rates were over 13%.

Interest rates have increased so high in such a short period of time that businesses cannot cope while inflation is even lower than the National Assembly's target. Businesses, after more than two years of lockdown, are like patients in need of resuscitation and emergency care. If measures are taken too late, recovery will be very difficult.

This year, monetary policy has been loosened as the State Bank has adjusted operating interest rates four times with a decrease of 0.5-2.0%/year, but the average deposit and lending interest rates of new transactions at the end of August 2023 only decreased by about 1.0% compared to the end of 2022.

“The economy is thirsty for capital but has difficulty absorbing it,” the National Assembly’s Economic Committee has rightly assessed. Credit growth as of October 11, 2023 reached 6.29% compared to the end of 2022 (an increase of 11.12% in the same period). In addition, total means of payment as of September 20, 2023 increased by only 4.75%, a low increase, equivalent to half of the same period in previous years.

However, unemployment as a consequence of the health of businesses in particular and the economy in general seems to be quite good, as usual.

The problem is that the way Vietnam calculates unemployment is that unemployed people are defined as those aged 15 and over and meet all three factors: currently not working, looking for work, and ready to work, which does not accurately reflect the employment picture in our country.

Here is a figure: In the period 2016-2021, the whole country had over 4 million workers requesting and receiving one-time social insurance benefits, an average of nearly 700,000 people per year, the number of the following year is always higher than the previous year with an average annual growth rate of about 11.6%.

The report of the Ministry of Labor, War Invalids and Social Affairs has not been updated for the past two years. The report of the National Assembly's Economic Committee also only has data on the number of workers whose working hours have been reduced or who have stopped working in the period from September 2022 to January 2023.

There are many issues of concern.

The Economic Committee believes that achieving the average growth target for the 2021-2025 period of about 6.5% - 7% and higher than the average of the 5 years 2016-2020 (6.25%) according to the Resolution of the National Assembly is an "extremely difficult" task, especially in the context of the extremely complicated and unpredictable world situation.

In addition, some targets will be very difficult to achieve without breakthrough solutions, such as GDP per capita; proportion of processing and manufacturing industry; average social labor productivity growth rate; urbanization rate; rate of trained workers with degrees and certificates; rate of health insurance participation...

These are the issues that the delegates will discuss to contribute ideas, find solutions and monitor the implementation because, as General Secretary Nguyen Phu Trong emphasized at the Mid-term Conference in May 2023: "Whether or not the Resolution is turned into a vivid reality; whether or not it creates material wealth, brings wealth and happiness to the people, that is the actual success of the Congress".

Tu Giang

Vietnamnet.vn