Repositioning Vietnam in the context of global fluctuations

Attending the online seminar were Associate Professor Dr. Pham Bao Son - Vice President of VNU, Prof. Dr. Andreas Stoffers - Country Director of the Friedrich Naumann Foundation for Freedom (FNF) in Vietnam, Associate Professor Dr. Nguyen Truc Le - Rector of the University of Economics, VNU, along with economic experts, policy researchers, scholars and scientists at home and abroad.

Speaking at the workshop, Associate Professor Dr. Pham Bao Son emphasized that since 2018, the Vietnam Institute for Economic and Policy Research (VEPR) - University of Economics, VNU, has been selected as one of the key research centers of VNU. VNU acknowledges the academic contributions and policy consultation that the Center has persistently made over the past time. The Center has affirmed its potential and capacity through the quality of its in-depth scientific research activities and products, and the Annual Economic Report is one of the typical products that has been recognized and highly appreciated for both its expertise and practical value.

Appreciating the role of the Conference, Associate Professor, Dr. Pham Bao Son said that the Conference was held in the context of the global recession due to the impact of the Covid-19 pandemic. It can be said that, along with the decline in productivity, economic growth, global trade and investment in recent years, the Covid-19 shock has made the global economic picture in 2020 gray.

Besides, globalization continues to progress but with opposite trends, the 4th industrial revolution opens up many new opportunities and challenges, traditional and non-traditional security issues increase in both level and scale.

“The 2021 Vietnam Economic Annual Report analyzes the Vietnamese economy in the context of fluctuations in the world economy, repositioning Vietnam in the global economy based on an assessment of Vietnam's comparative advantages and participation in the global value chain, as well as the competitiveness of the Vietnamese economy,”Associate Professor, Dr. Pham Bao Son said.

According to the Report, in 2020, global economic growth slowed down and became more unpredictable with a sharp decline in global trade and investment; employment and income also fell sharply; commodity markets suffered major shocks and vulnerabilities appeared in financial markets. The pandemic disrupted production and created a trend of reshaping global value chains (GVCs).

This has led to a series of governments and organizations launching strong economic stimulus and rescue packages to help stabilize the economy. Central banks around the world have also stepped in to support governments in the recovery process. However, concerns about a fourth wave of debt have become increasingly evident.

“The COVID-19 pandemic has caused a severe global recession, its impact second only to that of the two World Wars and the Great Depression of the 1930s. Many countries entered the crisis in precarious fiscal positions and had little capacity to mount a robust policy response involving health care or livelihood support. Measures such as social distancing, vaccinations and medical treatments have helped slow the spread of the virus and save lives; while supporting economic growth,”Associate Professor, Dr. Nguyen Truc Le said.

In that context, the Vietnamese economy ended the turbulent year of 2020 with impressive growth results. Vietnam achieved a GDP growth rate of 2.91% for the whole year and was one of the few economies in the world with positive growth. This is a remarkable result in the context that the Covid-19 pandemic has not been completely controlled and the production and consumption sectors have been negatively affected.

Production of goods and provision of services slowed down in all three sectors, with the service sector being the most severely affected, with its growth only about one-third of the average of previous years. The number of dissolved and temporarily suspended enterprises increased rapidly. Labor and employment fell sharply in the non-state sector. Business and consumer confidence both declined,…

Prof. Dr. Andreas Stoffers said that in 2020 the crisis had devastated the world economy and continued due to the Covid-19 pandemic. In the context of the global recession, Vietnam is one of the few countries in the world that has overcome the crisis to achieve impressive economic growth. Vietnam's economic picture has proven to be suitable and highly appreciated by the world.

Up to the first half of 2021, Vietnam's economic figures and indicators have many bright spots compared to other countries in the world.

“In many developing countries, interest rates are lower than inflation, causing people’s savings to gradually dry up. But with the right, appropriate and flexible economic policies, Vietnam has been able to avoid this,”Prof. Dr. Andreas Stoffers said.

Prof. Dr. Andreas Stoffers also warned of unpredictable impacts on the Vietnamese economy when this Covid-19 outbreak becomes more complicated, along with the general picture of the global economy and epidemic situation being covered in gray blood and having unpredictable uncertainties.

“With the admirable spirit of resilience and solidarity of the Vietnamese people in the fight against the Covid-19 pandemic, along with sensible and correct economic opening policies such as: commitment to trade liberalization, digitalization of the economy, opening up to FDI capital flows and prudent fiscal and monetary policies. I am very optimistic and believe that Vietnam will overcome this difficult period as it did in 2020 and position itself in a higher position.”,Prof. Dr. Andreas Stoffers said.

According to the Report, compared to a year ago when Covid-19 began to spread worldwide, the economic future is less uncertain thanks to experience in responding to the pandemic and the implementation of vaccination in many major countries around the world. However, the world economic outlook still depends on the ability to control the pandemic on a global scale, which is unlikely to happen within the next year.

Vietnam continues to integrate deeply into the world and is increasingly sensitive to external fluctuations. In particular, 2021 can be considered a pivotal year in a new development phase of the Vietnamese economy.

The driving force for Vietnam's economic growth is forecast to continue to come from exports and public investment. With foreign direct investment continuing to flow into Vietnam (although slowing down due to the impact of the pandemic), exports from this sector will still play a key role in economic growth for many years to come. However, the export growth rate will depend largely on the recovery of the world economy and the export of traditional goods that have been heavily affected in the past year.

Re-emergence of the pandemic could cause many production and consumption activities to stagnate. With the results achieved in the first 6 months of the year and the complicated developments of the current pandemic situation, the economic recovery process depends a lot on: the speed and scale of vaccination; the effectiveness/side effects of pandemic prevention measures; support packages and growth promotion in the country. The report forecasts economic growth in 2021 to decrease by 1-1.5 percentage points compared to before while assuming that the macroeconomic environment will continue to be maintained stable.

“In this context, Vietnam needs to implement a balanced policy to ensure both the safety and health of its people as well as the “health” of the economy,”Professor Andreas Stoffers emphasized.

The Vietnam Annual Economic Report 2021 provides policy recommendations:

In the short term,It is necessary to make efforts to synchronously implement measures to control the Covid epidemic, develop domestic vaccines and take advantage of strategic relationships to conduct vaccine diplomacy, prioritize ensuring supply and organize fast and effective Covid-19 vaccination for both production and business enterprises and groups of business households that are being affected by restrictions and social distancing in both major cities and key economic centers.

Policies to support businesses and people during the pandemic must be focused, economical, and targeted; public investment should only focus and accelerate on planned national key projects; monetary policy needs to pay special attention to controlling money supply growth and directing credit flows to the production sector.

In the medium and long term,need to enhance competitiveness, improve the business environment. In particular, it is necessary to continue to improve the local business environment of enterprises through the pillars of the PCI index. Vietnam needs to take advantage of trade and investment to improve Vietnam's position in the international arena in the future. To do this, it is necessary to see the particularly important role of FTAs ​​in improving Vietnam's comparative advantage and added value in the global supply chain (GVC), while creating an environment for FTAs ​​to promote their effectiveness.

The trend of greening and digitalization is being promoted, opening up many new opportunities and new ways of doing things for most industries. For the two industries of electronics and food, it is possible to study new opportunities and new ways of doing things such as developing clean and organic product segments; ways of trading products (using trading platforms...).

To improve Vietnam’s position in food GVCs, it is necessary to focus on three main pillars, including processing (performing specific tasks better), products (creating products of better quality, more complex or higher cost), and functions (acquiring new skills in the value chain that the company has not done before).