A lot of money is being pumped out, but is it going to the right places?

thesaigontimes.vn

Vietnam lacks a sufficiently flexible and effective mechanism to ensure money goes where it's needed. First, it needs to address the bottlenecks in public investment disbursement, and second, it needs to reorient credit flows: prioritizing manufacturing, green technology, and social housing instead of continuing to fuel speculative channels.

Some wood furniture export businesses are facing difficulties due to a decline in orders. (Illustrative photo: H. Như)

In early June, Mr. Hai, the director of a furniture company in Binh Duong, was considering downsizing his factory. Orders from Europe and the US had dropped by more than 30%, while raw material and shipping costs remained high.

"We had considered borrowing money to expand our production line, but now we don't dare take the risk anymore. No one borrows money to manufacture goods when there are no buyers," he said.

Hai's story is not unique. It reflects a worrying reality: a lot of money has been pumped into the economy, but its flow is being hampered. And when money doesn't go to the right place, it can create asset bubbles instead of restoring production.

In the first five months of the year, more than one trillion VND was injected into the economy through credit channels. Credit growth reached over 6%, showing that the State Bank of Vietnam has loosened monetary policy to the maximum extent to rescue growth. Lower interest rates and a flexible exchange rate – all conditions have been created for cheap capital to flow into the economy.

But expectations have not materialized. Money has mainly flowed into real estate, stocks, and short-term consumer spending – areas that are easy to profit from and low-risk. Meanwhile, manufacturing businesses – especially small and medium-sized enterprises (SMEs) – are struggling to access capital. It's not that banks are refusing loans, but rather that businesses are hesitant to borrow: there's no demand, orders are falling, and market confidence is weak.

Key export sectors such as textiles, wood, and electronics are all struggling. Some businesses are losing orders due to technical barriers – from ESG to carbon border taxes (CBAM) – leaving Vietnamese businesses at a crossroads of globalization, but lacking the "key" to enter. This is in addition to uncertainties regarding US tariff policies and escalating conflicts in the Middle East.

On another front, public investment – ​​a crucial channel for state capital – has lagged behind. Ho Chi Minh City, the country's largest economic center, has only disbursed just over 10% of its planned public investment capital in the first five months of the year. Numerous projects involving transportation, canals, schools, hospitals, etc., remain on paper due to legal issues, land acquisition problems, or a lack of coordination between departments and agencies.

Budgetary funds are available, and political will is clear, but the implementation apparatus remains sluggish in the administrative process. Meanwhile, many projects have commenced but have yet to create a ripple effect on the private sector.

Another indicator that the economy has not yet recovered is the number of businesses leaving the market. More than 111,000 businesses temporarily ceased operations or dissolved in the first five months of the year, an increase of over 14% compared to the same period last year. The majority of these are small, agile businesses – which are considered the driving force of the economy.

This means that while money is being injected at record rates, tens of thousands of businesses are forced out of the game because they cannot access capital, or because they no longer have a reason to exist in a weak consumer market.

Not only businesses, but also self-employed workers, small traders, and micro-businesses – the pillars of domestic consumption – are facing new pressure from tax policies. The fact that some localities are accelerating the abolition of lump-sum taxes and shifting to tax declarations has created significant anxiety among the small business community.

For small traders without complete invoices and receipts, monthly tax declarations are impossible. In this context, Deputy Prime Minister Ho Duc Phoc's proposal to continue applying a simplified lump-sum tax system for business households with revenue under 1 billion VND is reasonable and necessary.

Without timely adjustments, tax policies could inadvertently stifle the vitality of the street economy – a sector that provides livelihoods for millions and absorbs a large portion of daily consumer spending.

From a macroeconomic perspective, when there is more money than goods, inflation is inevitable. Last May, the consumer price index rose by 3.24%, the highest level in the last four months. Prices of essential goods are quietly escalating, while people's incomes remain unchanged.

Personal income tax deductions have been "frozen" for the past 11 years, putting increasing financial pressure on middle and low-income earners.

The core issue lies in the fact that while monetary policy has been loosened to its maximum extent, fiscal policy – ​​despite being boosted – has yet to generate a strong impetus due to implementation delays and disbursement obstacles. With consumption, private investment, and exports all weak, fiscal policy needs to be more proactive in stimulating demand and directing funds to where they are most needed.

We don't lack money. Vietnam lacks a sufficiently flexible and effective mechanism to direct money to the right places. First, we need to remove bottlenecks in public investment disbursement, from legal procedures and bidding processes to individual accountability. Next, we need to redirect credit flows to prioritize manufacturing, green technology, and social housing, instead of continuing to foster speculative channels.

Equally important is the need to reform personal income tax policies while maintaining stability for small businesses – those who are shouldering the daily burden of the economy but have not received adequate support.

Without a timely and coordinated policy shift, the economy will continue to rely on the inefficient injection of money, creating inflation risks and easily leading to instability.

Money has already been injected. The question is no longer "should we inject more?", but rather: how do we get that money to where it's most needed?

( According to )

Source: https://baoapbac.vn/su-kien-binh-luan/202506/tien-duoc-bom-ra-nhieu-nhung-lieu-co-den-dung-cho-1046354/