The 2023 budget deficit is estimated at about 4% of GDP.

This year's budget deficit is estimated at 4% of GDP, lower than the Ministry of Finance's previous estimate of 4.42%, but marking a return to growth after the Covid-19 pandemic.

This information is mentioned in the report of the Ministry of Finance sent to the Government on the public debt situation in 2023, and the expected borrowing and debt repayment plan in 2024.

This year, Vietnam faces many difficulties in responding to external and internal fluctuations in the economy , the agency said. Import-export and foreign investment - important growth drivers of the economy - have stagnated or decreased compared to the same period in 2022. Many export businesses have had to reduce production scale or labor.

Difficulties in the real estate and banking markets have had an unfavorable impact on the state budget balance. Accordingly, this year, the estimated budget revenue is more than 1.62 million billion VND. The budget deficit is about 4% of GDP. If calculated based on the GDP scale of 2022 of 409 billion USD, the deficit in 2023 is about 16.4 billion USD (equivalent to more than 402,000 billion VND). This level is lower than the estimate given by the Ministry of Finance at the beginning of the year of 4.42% of GDP in 2022, but still higher than the period of the Covid-19 pandemic (from 2020 onwards, it has been below 4% of GDP).

In addition to the deficit, public debt safety indicators ensure the safety threshold decided by the National Assembly. Specifically, it is estimated that by the end of 2023, public debt will be about 39-40% of GDP. Government debt will be 36-37% of GDP and the country's foreign debt will be 37-38% of GDP.

The Government's direct debt repayment obligation is about 20-21% of total budget revenue. The country's foreign debt repayment is about 7-8% of total export turnover of goods and services, ensuring within the limit allowed by the National Assembly (25%).

Regarding the borrowing and debt repayment plan, according to the National Assembly's resolution, the total amount of borrowing this year to cover the central budget deficit and repay principal is VND621,015 billion. On this basis, in the report sent to the National Assembly Standing Committee, the Government said it plans to borrow nearly VND604,380 billion, equivalent to 94% of the plan. Of which, more than 90% of the source of deficit compensation comes from domestic borrowing through the issuance of government bonds, the rest is foreign borrowing (ODA capital, incentives from donors). The current bond term is 1-3 years higher than before, averaging 12.6 years, and the interest rate has also increased compared to 2022, at 3.7-4% per year.

This year, the Government will pay about VND311,537 billion in debt, of which nearly 90% is direct debt repayment (VND279,742 billion), the rest is foreign debt for re-lending. However, the exchange rate of currencies has fluctuated, leading to the use of less VND budget when buying foreign currency to pay off debt.

According to data from the State Bank, as of September 26, USD increased by 3.41%, EUR increased by 2.72%, JPY decreased by 7.99% compared to January 1, 2023. Taking into account the exchange rate impact of the above three currencies alone, the Government's foreign debt at the end of 2022 (if converted according to the exchange rates of USD, EUR and JPY) compared to the exchange rate at the beginning of 2023 decreased by about VND 6,600 billion, or 0.07% of GDP 2022.

For the local budget, the total loan in 2023 is about 15,920 billion VND (11,278 billion VND less than the loan level approved by the National Assembly). Localities must repay the principal of about 2,648 billion VND, a decrease of 156 billion VND compared to the estimate. With these borrowing and repayment figures, the estimated local budget deficit this year is about 13,271 billion VND, a decrease of nearly 11,730 billion VND compared to the National Assembly's estimate.

Mr. Minh

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