The World Bank (WB) has recommended that in the short term, fiscal policy needs to be designed in a way to support total demand. 

A fully deployed investment budget, combined with steps to remove bottlenecks in public investment procedures, is the way to increase public investment to 7.1 percent of GDP in 2023, thereby supporting total demand.

The Asian Development Bank (ADB) also believes that it is necessary to urgently adopt a policy to stimulate business activities. Vietnam has been advised to speed up disbursement for public investment projects, because this will have influence the construction and material production sectors and create more job opportunities.

According to ADB, the fiscal deficit will increase in the second half 2023. The National Assembly has agreed to cut the value added tax (VAT) by 2 percent, valid until the end of 2023, and fiscal expansion will continue.

At present, the disbursement for public investment is still going slowly. The implemented investment capital from the state budget in the first nine months was estimated at VND415.5 trillion, or 57.4 percent of the yearly plan, an increase of 23.5 percent compared with the same period last year (56 percent and 20.3 percent, respectively).

As many as 42 ministries and central agencies, and 26 localities, reported disbursed capital below the average level, while 8 ministries and 27 localities had high disbursement rates, over 55 percent.

The government has committed to accelerate the pace of construction works and strategic national and inter-provincial projects; complete and put into operation 659 kilometers of highway; kick off 12 component projects of the North-South Expressway super-project with the total length of 723.7 kilometers; and continue to build the highway on the East-West axis, Belt Road No 3 in HCM City and Belt Road No 4 in Hanoi.

The government has requested appropriate agencies to fulfill investment procedures soon to start important projects in late 2023, including the Chon Thanh-Duc Hoa, Rach Soi-Ben Nhat, Go Quao-Vinh Thuan and Cho Chu-Trung Son crossroads, Dai Nai Bridge, Hoa Lien-Tuy Loan, the sections of the Ho Chi Minh highway project.

To support businesses, the state will launch the policy packages on tax cuts and tax payment deadline extensions, land use lease remission with estimated total value of VND200 trillion in 2023, including VND79 trillion from tax cut/reduction, and VND121 trillion for payment extension.

The three-year state budget overexpenditure is estimated at 3.6 percent of GDP, within the safety line (3.7 percent). By the end of 2022, public debt had reached 38 percent of GDP.

Luong Bang