In 2022, the driving force for Vietnam’s economic growth will still be import and export, attracting foreign direct investment (FDI) and public investment. Among these factors, public investment is the most important.
2021: Excess capital, failed goals
Due to the impact of the Covid-19 pandemic, Vietnam’s GDP growth in 2021 reached merely 2.58%, the lowest in the past 30 years.
The fields that make great contributions to the country’s growth such as processing and manufacturing, services, and agriculture were all hit by the pandemic. Experiences learned from the past show that increasing government spending, including boosting public investment, will be an effective solution to promote economic growth.
Public investment capital often comprises large resources to be invested in important projects. The disbursement process of these projects will lure other reciprocal capital flows of private and foreign investors, creating spillover effects for the entire economy.
Experts say that speeding up public investment will push demands and this will stimulate businesses to invest in production. Moreover, public capital invested in infrastructure development will not only create immediate demand but also a foundation for long-term development.
Statistics show that at present, public investment accounts for more than 10% of the total GDP value, about 32% of the total annual social investment. According to the General Statistics Office of Vietnam, every 1% increase in public investment disbursement will increase GDP by 0.06 percentage points.
However, the slow disbursement of public investment in 2021 affected economic growth. According to the Government’s report, as of December 31, 2021, disbursement of public investment capital reached 77.3% of the assigned plan, compared to 82.66% in the same period of 2020.
The Government has just submitted to the National Assembly the “Financial and monetary policy scheme to support the program of socio-economic recovery and development”, with a total support package of nearly 340,000 billion VND for 2022 and 2023.
Under this scheme, 176 trillion VND of budget capital will be spent on development investment. Particularly, investment in strategic transport infrastructure, including the North-South expressway to the East, a number of expressways, roads connecting border gates and national highways totals 103,164 trillion VND. Projects to ensure reservoir safety, prevent riverbank and coastal erosion, and adapt to climate change will be invested with 5,000 billion VND.
Deputy Minister of Planning and Investment Tran Quoc Phuong said that learning from experience in 2021, the direction and management of public investment disbursement in 2022 will be implemented very seriously this year.
Regarding infrastructure investment in 2022, public investment capital assigned by the Government is more than 50,000 billion VND, compared to 43 trillion VND in 2021, with many major infrastructure projects, especially the North-South Expressway Phase 2.
Rahul Kitchlu, World Bank’s Infrastructure Program Manager in Vietnam, noted that, in addition to infrastructure projects, the Vietnamese Government should solve complex problems in the process of realizing the goal of becoming a high-income economy. These issues include green growth, in which investment in low-carbon infrastructure and resilience to climate change are very important goals, followed by investment in innovation and digital transformation.
It must be confirmed that the private sector will be the engine of growth in Vietnam and public investment can be the catalyst for growth. Thus, it is necessary to implement reform programs, to update the investment framework for the country, to provide incentives for the private sector to participate and invest in some sectors of the economy, Rahul Kitchlu said.
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