The difficulties arise in the second part of 2022

DNHN - The Ministry of Planning and Investment recognizes that the pressures and challenges confronting the economy in the last months of the year are intensifying, particularly due to the worldwide inflation scenario.

In particular, under the base scenario, global inflation may peak in the second or third quarter before steadily declining and stabilizing by the end of next year. Energy prices stay high this year but will begin to fall next year as global supply networks progressively recover and governments' policy tweaks to reduce inflation take effect.

However, inflation may continue to rise and peak early next year before dropping in 2024. At the time, the price of oil may exceed $150 per barrel. In another scenario, if the war between Russia and Ukraine is resolved shortly, inflation will fall rapidly and will normalize by mid-2023.

According to the Ministry of Planning and Investment, external inflation is having an impact on local output, particularly in agriculture. Due to high fertilizer and animal feed costs, individuals have curtailed their investment in growing output, re-herding, and re-cropping. Industrial output is also being hampered by rising raw material prices and rising transportation expenses.

Meanwhile, the unexpected rise in building material prices has hampered the execution and distribution process of the public investment plan. There is a scenario in which contractors remain idle to wait for material costs to fall or move to hunt for employment at FDI projects, resulting in a labour shortage to undertake major national projects.

On the other hand, the overlap of specialized legislative procedures connected to the execution of public investment projects, as well as site clearance constraints, causes delays in the flow of public investment resources. As of July 31, the disbursement rate is anticipated to be less than 35% of the plan, which is lower than the same time the previous year.

The stock market, corporate bonds, and real estate are all fragile at the moment, with several possible hazards that might have a significant impact on the economy. Meanwhile, management continues to face several challenges, and there is no efficient cooperation across agencies.

The Ministry of Planning and Investment also said that the quality of FDI flows has not improved in the past, owing to a lack of large-scale projects, contemporary technology, high added value, tight links, and transfer assistance. domestic technological innovation

"This will affect the FDI sector's potential for product development, the domestic sector's ability to innovate technology, as well as the balance of payments, foreign currency reserve capacity, exchange rate, etc. pricing... in the medium and long term," the agency's study added.

In general, Vietnam belongs to the low-middle-income category; the major issue is to maintain a rapid growth rate and avoid sliding into the middle-income trap. Currently, the economy's competitiveness is low, and the growth strategy is not built on research, technology, and innovation.

PV