Production in HCM City has been resumed

According to the Ministry of Planning and Investment (MPI), the macroeconomy continues to be stable, the inflation rate is low, and major balances are ensured. The CPI (consumer price index) of the first 11 months of the year increased by 1.84 percent over the same period last year, the lowest since 2016. The monetary market and the dong/dollar exchange rate were stable, interest rates stayed low, and the credit growth rate was 9.65 percent.

The state budget collections by the end of November had reached the level targeted for year 2021.

The statistics show that the goal of stabilizing the macroeconomy is still the top priority as per the spirit of the 13th Party Congress and the National Assembly Resolution on socio-economic development.

This May be why the Government is still carefully considering the size of the bailout package and has not launched it yet for fear of inflation amid higher inflation rates around the world.

Also according to MPI, industrial production in November continued to prosper with the IIP increasing by 5.6 percent over the same period last year. In the first 11 months of the year, the index rose by 3.6 percent.

The Ministry of Industry and Trade (MOIT) reported that production in cities and provinces with important industrial enterprises such as Bac Ninh, Bac Giang, Hai Phong, Quang Ninh, Da Nang, Can Tho, Binh Duong, Dong Nai, HCM City and Hanoi has shown ‘positive developments’.

In most localities, especially HCM City and southern provinces, production has resumed and enterprises are gearing up to implement contracts they signed with partners. Quang Ninh’s IIP (index of industrial production) increased by 19 percent in November, Thanh Hoa’s 15 percent, Quang Ngai’s 16 percent, Thua Thien – Hue’ 9 percent, Can Tho’s 6.8 percent and Dong Nai’s 6.9 percent, which contributed to the country’s industrial production recovery.

Total import and export turnover in the first 11 months increased by 22.3 percent, of which exports increased by 17.5 percent. November was the third consecutive month with a trade surplus, which contributed to an excess of exports over imports of $225 million in the first 11 months.

According to MPI, the number of newly registered businesses in November rose by 44.6 percent and capital increased by 38 percent, while the number of enterprises returning to the market went up by 15.2 percent over October.

The investment capital from the state budget in November rose by 15 percent over the month before, or 74 percent of the yearly plan. The total newly and additionally registered FDI increased by 11 percent in the first 11 months, while implemented capital was $17 billion, which showed that foreign investors have confidence in Vietnam’s investment environment.

Vietnam has established the new normal thanks to the acceleration of vaccinations, becoming one of the top 20 countries with the highest number of vaccinated doses, ranking second in Southeast Asia and seventh in Asia. It is one of three countries with the fastest immunization rate if considering the doses given daily and weekly.

As such, the spirit of Resolution 128 is very important to implement the dual task of fighting the pandemic and developing the economy.

Risks ahead

Vietnam has established the new normal thanks to the acceleration of vaccinations, becoming one of the top 20 countries with the highest number of vaccinated doses, ranking second in Southeast Asia and seventh in Asia.

The world economy is recovering, though it is not the same level in all countries. IMF predicts a 5.2 percent growth rate for the US, 4.3 percent for the EU, 3.2 percent for Japan, 5.6 percent for China and 8.5 percent for India..

Vietnam, an economy with high openness, is expected to benefit from the recovery of these markets.

However, according to MOIT, though production is gradually recovering, enterprises are still facing difficulties, especially ones located outside industrial zones (IZs).

In Dong Nai, for example, only 83.5 percent of enterprises outside IZs have resumed operation and 65.5 percent of workers have returned, which is lower than the 99 percent and 88 percent, respectively, of enterprises in IZs. This shows that small and medium enterprises outside IZs are having difficulties reopening. The IIP therefore may increase by only 4-5 percent this year, or half of the targeted 8-9 percent.

According to IMF, input material prices and inflation rates around the world are at high levels, which has put pressure on central banks, forcing them to raise interest rates to prevent macro risks.

In Vietnam, however, the inflation rate in the first 11 months was 1.84 percent, a 5-year low. This is attributed to business and consumer exhaustion after four months of lockdown. It is reflected in a drop in goods and service retail turnover of 19.8 percent in July, 31.3 percent in August, 28.4 percent in September, 19.5 percent in October and 12.2 percent in November.

Purchasing power declined dramatically, while the number of dissolved and bankrupted businesses rose, and investments contracted amid high inflation around the world, which explained why the CPI of the first 11 months was a 5-year low.

The inflation risk exists because of the cost push, but domestic demand is still very weak. If there is no fiscal bailout package large enough to support enterprises in a critical situation, Vietnam will be ‘out of tune’ with the rest of the world.

According to the General Statistics Office (GSO), the complicated developments of the fourth pandemic wave in key economic cities and provinces worsened the employment situation in Q3, with unemployment and underemployment rates reaching an all-time high.

Economists predict that Vietnam’s GDP will grow only by 2 percent this year. 

Tu Giang

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