The State budget deficit, which regularly remains at a high level, and rising public debt are among the biggest macro-economic risks facing Việt Nam, making it more difficult for the Government to help the economy head towards growth, said Professor Trần Thọ Đạt, principal of the National Economics University (NEU).
Đạt, who is a member of the Prime Minister’s economic advisory team, made the statement on Monday at the national scientific conference on Việt Nam’s economy in 2018 and prospects for this year.
Participating specialists and scientists assessed Việt Nam’s economic performance, pointed out shortcomings, analysed opportunities and made financial policy recommendations to ensure the safety and sustainability of nation’s finances.
According to Professor Đạt, Việt Nam’s economic performance has showed positive signs with last year’s GDP growth rate at 7.08 per cent, the highest rate in the last ten years. The primary contributions to growth come from Foreign Direct Investment, the processing and manufacturing industry, domestic consumption and a trade surplus.
However, efforts to improve the business climate have recently slowed. Other challenges come from difficulties encountered by the private sector and greater fiscal risks.
Việt Nam’s public spending over the past ten years has remained high while State budget collection is unable to cover the spending. Việt Nam’s State budget deficit is the highest in the region. The country has no other choice but to continue borrowing to compensate for the overspending, causing public debt to rise, he said.
“This has affected long-term economic growth, macro-economic stability and Việt Nam’s capacity to respond to changes in the economic sector,” Đạt said.
Associate Professor Tô Trung Thành from NEU said Việt Nam is vulnerable to external pressures. Escalating global trade conflicts are forecast to lead to declining demand for exports and decreasing foreign investment to the country.
Domestic factors also impact national economic growth. The slow restructuring of State-owned enterprises and the banking sector is predicted to place a greater burden on the public sector, he said.
Senior economist Võ Trí Thành said economic growth depends on multi-national corporations. Việt Nam will be affected if these groups face challenges, making it the biggest difficulty the country currently faces.
Participants at the conference agreed that it was necessary for Việt Nam to assess fiscal policy in the context of new economic developments and analyse the impacts of fiscal policy on the economy.
Việt Nam needs to reform its tax collection system to reduce the burden and cut spending on administrative management.
Financial allocation and management tasks should be assigned to local authorities and they must uphold their responsibility of ensuring transparency, the conference was told.
On the same day, the NEU released Việt Nam’s Annual Economic Report 2018 themed “Towards sustainable fiscal policy that supports growth”.
Associate Professor Tô Trung Thành, co-author of the report, said the document includes personal comments and independent policy arguments by NEU experts about economic issues in 2018. The scientific and practical evidence-based report discusses economic issues by using quantitative and qualitative methods.
“The report has different features and highlights compared to other annual economic reports. It will serve as a useful reference for policy makers,” he said.
The report’s first chapter evaluates Việt Nam’s economic performance in 2018 and prospects for this year. The second part looks into Việt Nam’s fiscal policy including State budget collection and spending and assesses the impacts of fiscal policy on the economy in the medium and long-term.
The last chapter proposes recommendations towards sustainable fiscal policy which supports economic growth.
Last year edition of the NEU’s report was themed “Removing barriers to the development of private enterprises”.