5 policy proposals for macroeconomic stability and inflation control

DNHN - Deputy Director of the Institute for Economic and Policy Research (VEPR), Dr Nguyen Quoc Viet, advocated strategies to reconcile macroeconomic stability and inflation management.

Vietnam's economy tends to rebound quite favourably in the first nine months of 2022, preserving macroeconomic stability and key balances. However, the problems and hurdles that must be overcome are significant.

The most difficult task, according to Dr Nguyen Quoc Viet, Deputy Director of the Institute for Economic and Policy Research, is combining the aims of macro stability, price stability, and inflation management with the goals of preserving growth.

Due to global geopolitical uncertainty, governments are presently enacting restrictive monetary policy, and rising interest rates, causing challenges for both production and consumption, potentially leading to job loss, reduced investment, and falling into an economic recession spiral.

Gasoline, food, steel, fertilizer... the globe is cooling, but it is impossible to foresee; shortages, supply interruptions, increasing global production and shipping costs, etc., all put pressure on inflation and local commodity prices.

Credit expansion is under intense pressure to keep inflation under control. Although the need for loans to recover and develop production and company has increased, many enterprises continue to confront difficulty in obtaining loans.

Exports confront considerable problems; the market diminishes as the US economy and many developed nations face recession; orders for textiles, lumber, and seafood... to the US and EU show symptoms of decline; inventory builds.

Dr Nguyen Quoc Viet also recommended a variety of operational strategies from now through the end of the year to manage inflation and minimize inflationary pressure: "First and foremost, I believe it is critical to continue executing steps specified by the Prime Minister to stabilize the macroeconomy, maintain price stability, and contain inflation." Simultaneously, explore governmental actions to assist manufacturing groups or employees experiencing problems as a result of high raw material prices."

Special emphasis is placed on assessing and immediately adopting support policies for highly specialised production and service groups that rely on input material prices or high logistical costs (for example, fishing, public transportation, and export of agricultural and aquatic products).

Second, the government must continue to be flexible and tenacious in pursuing measures that both support inflation control and encourage long-term growth, as outlined in National Assembly resolutions. With the control situation being as good as it has been in recent months, it is prudent to progressively continue to execute groups of policy solutions, including fiscal and monetary policies, that may have been postponed in the past to promote economic recovery and company business recovery.

If the inflation situation is expected to be adequately handled by the end of the year, it is prudent to consider certain loosening steps to assist growth, such as relaxing the credit facility and, in particular, deploying the 2% interest rate support package following the Government's resolve.

Third, the private sector has demonstrated its flexibility and resilience during and after the COVID-19 pandemic, maintaining a strong investment growth rate during and after the pandemic, with a return as well as the establishment of tens of thousands of businesses, it will undoubtedly be a great driving force for the recovery of production - business and growth in the final months of 2022.

As a result, to restore growth while contributing to market stabilization and inflation control in the future, the government's policy priority should be to develop the private economy, build an autonomous, self-reliant, and integrated economy, and provide attention and support, particularly capital and market access support (both supply and demand), as well as deeper participation in the supply chain.

Special attention is paid in particular to assisting businesses and industries in becoming self-sufficient in input materials, with strong policies to develop supporting industries, develop high technology, or simply review and eliminate additional taxes/fees or unnecessary burdens for private enterprises to grow stronger and more equal.

Fourth, the external economic sector, particularly the industrial sector (primarily the processing and manufacturing industries, with FDI companies serving as the primary driver), will continue to play an important role in contributing to economic growth this year. To support the external economic sector and promote an economic boost in Vietnam's exports in the last months of 2022, it is important to continue to pay attention to fixing challenges in the business environment, such as labour shortages or supply chain disruption causes.

Fifth, forecasting and policy review should be done frequently, with greater openness, transparency, and speed. Sectors and levels must regularly update policies and, in particular, publish data so that agencies, research organizations, policy consultants and critics, as well as the press, can participate in making contributions and forecasting the economic situation, and at the same time make suggestions on timely policy adjustments to both stabilize the macro economy and ensure development goals, as well as restore sustainable growth in 2022 and 2023, as required goals established by the National Assembly and the Government in the Resolution at the start of the year.

Thanh Ha