{"id":76859,"date":"2024-03-05T08:46:00","date_gmt":"2024-03-05T01:46:00","guid":{"rendered":"https:\/\/neu.edu.vn\/prof-dr-to-trung-thanh-focus-on-demand-side-policies-to-meet-the-2024-growth-target\/"},"modified":"2024-03-05T08:46:00","modified_gmt":"2024-03-05T01:46:00","slug":"prof-dr-to-trung-thanh-focus-on-demand-side-policies-to-meet-the-2024-growth-target","status":"publish","type":"post","link":"https:\/\/neu.edu.vn\/en\/prof-dr-to-trung-thanh-focus-on-demand-side-policies-to-meet-the-2024-growth-target\/","title":{"rendered":"Prof. Dr. To Trung Thanh: Focus on Demand-Side Policies to Meet the 2024 Growth Target"},"content":{"rendered":"
\n

Challenges Persist, but Economic Improvements in the First Two Months Raise Hopes of Meeting the 2024 Growth Target and Building Momentum to Complete the Five-Year Plan\u2026<\/h2>\n
\"Monetary
Monetary policy is gradually running out of room, fiscal support for growth has fallen short of expectations, and businesses facing numerous adverse conditions have had to scale back and wait for opportunities.<\/figcaption><\/figure>\n<\/p><\/div>\n
\n

Instability in the global economy and the bleak outlook for Vietnam\u2019s major trading partners (such as the United States, the EU, and China) will certainly slow domestic GDP growth. Adverse and uncertain global economic conditions have led to downward revisions in all forecasts for Vietnam\u2019s growth in 2024 compared with 2023. Resolution No. 103\/2023\/QH15 dated November 9, 2023, on the 2024 Socioeconomic Development Plan sets a full-year GDP growth target of approximately 6\u20136.5%, more optimistic than forecasts by international organizations.<\/p>\n

The year 2024 is particularly important: it must be a year of acceleration and breakthroughs in implementing the 2021\u20132025 Five-Year Socioeconomic Development Plan, which targets average growth of 6.5\u20137%.<\/p>\n

A Smooth Start, but Challenges Persist<\/h3>\n

The smooth start in the first two months of 2024 has raised expectations of more favorable results for the full year. Data from the General Statistics Office show that total merchandise imports and exports in the first two months of 2024 reached an estimated USD 113.96 billion, up 18.6% year over year. Total foreign investment registered in Vietnam as of February 20, 2024, reached nearly USD 4.29 billion, up 38.6%; disbursements were estimated at USD 2.8 billion, up 9.8%.<\/p>\n

Meanwhile, the Index of Industrial Production (IIP) rose an estimated 5.7% (compared with a 2.9% decline in the same period of 2023). Nationwide, 41,100 businesses were newly registered or resumed operations, up 8.5% year over year. Despite numerous positive signals, some economic indicators in February 2024 still recorded declines or some degree of stagnation compared with the previous month and the same period a year earlier.<\/p>\n

Reviewing the challenges of 2023 is essential to managing policy more effectively this year. The year 2023 is considered one of the most difficult for Vietnam\u2019s economy in recent years.<\/p>\n

\"Focus
<\/figcaption><\/figure>\n

Amid numerous risks and uncertainties\u2014including a global economy that had not fully recovered after COVID-19, persistently high global inflation, continued monetary tightening by central banks, slowing growth in many major economies, and political factors such as the still highly complex Russia\u2013Ukraine war and the increasingly tense Israel\u2013Hamas conflict\u2014Vietnam\u2019s growth rate in 2023 fell sharply from 8.02% in 2022 and below the Government\u2019s target of 6.5%.<\/p>\n

This figure was also much lower than the pre-pandemic growth rates of 7.47% and 7.36% in 2018 and 2019, respectively. Growth in 2023 was higher only than the rates of 2.87% and 2.55% recorded in the two COVID-19 years of 2020 and 2021. The 2023 growth results clearly reflect a sharp decline in the components of aggregate demand.<\/p>\n

\n
\n
Prof. Dr. To Trung Thanh, National Economics University (NEU).<\/figcaption><\/figure>\n

“Aggregate demand plays an important role in determining the level of production and employment in the economy.<\/p>\n

A decline in aggregate demand indicates that the economy is at risk of recession, affecting overall economic growth and causing consequences such as declining industrial production, rising unemployment, and falling household incomes and spending.<\/p>\n

A prolonged shortfall in aggregate demand (consumption, investment, and exports) can constrain increases in aggregate supply and lead to low economic growth.”<\/p>\n<\/p><\/div>\n<\/p><\/div>\n

Among the expenditure components of aggregate demand, capital formation increased by 4.09% (compared with 5.04% in 2022). Total realized investment across the economy in 2023 at current prices increased by 6.2% year over year (compared with 11.2% in 2022).<\/p>\n

Within state-sector investment, realized investment funded by the state budget reached only 85.3% of the annual plan. Realized investment in the non-state sector increased by only 2.7%, significantly below the 8.9% increase in 2022.<\/p>\n

Realized foreign direct investment in Vietnam increased by only 5.4%, compared with 13.9% in 2022. The non-state sector\u2019s share of investment fell from 58.2% in 2022 to 56.1%. This reflects the enormous difficulties facing the private sector following the severe and prolonged impact of the pandemic.<\/p>\n

Meanwhile, momentum in spending and consumption tended to weaken. The final consumption component of aggregate demand increased by only 3.52% (compared with 7.09% in 2022). For 2023 as a whole, total retail sales of goods and consumer service revenue increased by 9.6% over the previous year (compared with 20% in 2022). Excluding price effects, the increase was 7.1% (compared with 15.8% in 2022). Falling household incomes led to lower consumer demand for goods.<\/p>\n

Thus, both final consumption and capital formation grew more slowly than the overall growth rate. GDP growth of 5.05% resulted from an improvement in the balance of exports and imports of goods and services at constant prices. The merchandise trade balance in 2023 recorded an estimated surplus of USD 28 billion, a notable contributor to growth (compared with a surplus of USD 12.1 billion the previous year), adding 1.6 percentage points to overall growth. However, total merchandise imports and exports fell by 6.6% from the previous year, with exports down 4.4% and imports down 8.9%.<\/p>\n

The large trade surplus actually resulted from import growth being lower than export growth. According to statistics over many years, imports of production inputs account for 60%, imports for gross capital formation account for more than 30%, and imports for final consumption account for just under 10%. Thus, a sharp decline in import growth also indicates that production is facing severe difficulties, particularly in the next production cycle.<\/p>\n

Scaling Back Production While Awaiting Opportunities<\/h3>\n

On the aggregate supply side, agriculture, forestry, and fisheries continued to serve as a pillar of the economy in 2023, growing by 3.83% (compared with 3.36% in 2022), while industry faced numerous difficulties amid declining global aggregate demand.<\/p>\n

Value added across industry increased by only 3.02% in 2023 over the previous year, the lowest growth rate in the 2011\u20132023 period. Manufacturing, the mainstay of industrial production, grew by only 3.62%, also its lowest rate in the 2011\u20132023 period.<\/p>\n

The manufacturing sector remained weak for most of 2023, with the Purchasing Managers\u2019 Index (PMI) below the 50 threshold in 10 of the 12 months. The annual average PMI was the lowest since the outbreak of the COVID-19 pandemic in 2020.<\/p>\n

\n
\n

A PMI below 50 points indicates a sharp contraction in production overall, driven by falling orders, weakening demand, rising prices, and increasing input costs.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n

Business registration figures also reflect numerous difficulties. Nearly 160,000 businesses were newly established in 2023, up 7% from 2022.<\/p>\n

Although the number increased, the growth rate was much lower than the 27.1% recorded in 2022.<\/p>\n

Meanwhile, approximately 58,000 businesses resumed operations, fewer than the 60,000 in 2022. The numbers of businesses temporarily suspending operations and awaiting dissolution procedures stood at 89,000 and 65,000, respectively, both higher than in 2022.<\/p>\n

At the same time, the number of businesses suspending operations for a specified period rose sharply, increasing by more than 15,000 compared with 2022, reflecting the many adverse conditions businesses face in the investment and business environment.<\/p>\n

These businesses are struggling, operating ineffectively, and lacking viable business plans. They therefore register to suspend operations temporarily rather than dissolve, allowing time to find customers and develop effective business plans. Clearly, many businesses are \u201cbarely surviving\u201d and waiting for changes in the external environment to create opportunities for recovery.<\/p>\n

Momentum for Growth in 2024<\/h3>\n

With no substantive improvement in the economic model, the Government will have to rely primarily on demand-side policies to achieve the high growth target in 2024 itself (in the short term), from the low growth base of 2023. Growth drivers on the aggregate demand side need to be restored rapidly and strengthened further…<\/p>\n

Prof. Dr. To Trung Thanh, Head of the Department of Research Management, NEU<\/p>\n

Link: https:\/\/vneconomy.vn\/tap-trung-chinh-sach-trong-cau-hoan-thanh-muc-tieu-tang-truong-nam-2024.htm<\/a><\/p>\n<\/p><\/div>\n

\"\"<\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n

This is an automated translation. If you notice any errors, please contact the Department of Communications, National Economics University at phongtruyenthong@neu.edu.vn<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Challenges Persist, but Economic Improvements in the First Two Months Raise Hopes of Meeting the 2024 Growth Target and Building Momentum to Complete the Five-Year Plan\u2026 Monetary policy is gradually running out of room, fiscal support for growth has fallen short of expectations, and businesses facing numerous adverse conditions have had to scale back and wait for opportunities. Instability in the global economy and the bleak outlook for Vietnam\u2019s major trading partners (such as the United States, the EU, and China) will certainly slow domestic GDP growth. Adverse and uncertain global economic conditions have led to downward revisions in all forecasts for Vietnam\u2019s growth in 2024 compared with 2023. Resolution No. 103\/2023\/QH15 dated November 9, 2023, on the 2024 Socioeconomic Development Plan sets a full-year GDP growth target of approximately 6\u20136.5%, more optimistic than forecasts by international organizations. The year 2024 is particularly important: it must be a year of acceleration and breakthroughs in implementing the 2021\u20132025 Five-Year Socioeconomic Development Plan, which targets average growth of 6.5\u20137%. A Smooth Start, but Challenges Persist The smooth start in the first two months of 2024 has raised expectations of more favorable results for the full year. Data from the General Statistics Office show that total merchandise imports and exports in the first two months of 2024 reached an estimated USD 113.96 billion, up 18.6% year over year. Total foreign investment registered in Vietnam as of February 20, 2024, reached nearly USD 4.29 billion, up 38.6%; disbursements were estimated at USD 2.8 billion, up 9.8%. Meanwhile, the Index of Industrial Production (IIP) rose an estimated 5.7% (compared with a 2.9% decline in the same period of 2023). Nationwide, 41,100 businesses were newly registered or resumed operations, up 8.5% year over year. Despite numerous positive signals, some economic indicators in February 2024 still recorded declines or some degree of stagnation compared with the previous month and the same period a year earlier. Reviewing the challenges of 2023 is essential to managing policy more effectively this year. The year 2023 is considered one of the most difficult for Vietnam\u2019s economy in recent years. Amid numerous risks and uncertainties\u2014including a global economy that had not fully recovered after COVID-19, persistently high global inflation, continued monetary tightening by central banks, slowing growth in many major economies, and political factors such as the still highly complex Russia\u2013Ukraine war and the increasingly tense Israel\u2013Hamas conflict\u2014Vietnam\u2019s growth rate in 2023 fell sharply from 8.02% in 2022 and below the Government\u2019s target of 6.5%. This figure was also much lower than the pre-pandemic growth rates of 7.47% and 7.36% in 2018 and 2019, respectively. Growth in 2023 was higher only than the rates of 2.87% and 2.55% recorded in the two COVID-19 years of 2020 and 2021. The 2023 growth results clearly reflect a sharp decline in the components of aggregate demand. Prof. Dr. To Trung Thanh, National Economics University (NEU). “Aggregate demand plays an important role in determining the level of production and employment in the economy. A decline in aggregate demand indicates that the economy is at risk of recession, affecting overall economic growth and causing consequences such as declining industrial production, rising unemployment, and falling household incomes and spending. A prolonged shortfall in aggregate demand (consumption, investment, and exports) can constrain increases in aggregate supply and lead to low economic growth.” Among the expenditure components of aggregate demand, capital formation increased by 4.09% (compared with 5.04% in 2022). Total realized investment across the economy in 2023 at current prices increased by 6.2% year over year (compared with 11.2% in 2022). Within state-sector investment, realized investment funded by the state budget reached only 85.3% of the annual plan. Realized investment in the non-state sector increased by only 2.7%, significantly below the 8.9% increase in 2022. Realized foreign direct investment in Vietnam increased by only 5.4%, compared with 13.9% in 2022. The non-state sector\u2019s share of investment fell from 58.2% in 2022 to 56.1%. This reflects the enormous difficulties facing the private sector following the severe and prolonged impact of the pandemic. Meanwhile, momentum in spending and consumption tended to weaken. The final consumption component of aggregate demand increased by only 3.52% (compared with 7.09% in 2022). For 2023 as a whole, total retail sales of goods and consumer service revenue increased by 9.6% over the previous year (compared with 20% in 2022). Excluding price effects, the increase was 7.1% (compared with 15.8% in 2022). Falling household incomes led to lower consumer demand for goods. Thus, both final consumption and capital formation grew more slowly than the overall growth rate. GDP growth of 5.05% resulted from an improvement in the balance of exports and imports of goods and services at constant prices. The merchandise trade balance in 2023 recorded an estimated surplus of USD 28 billion, a notable contributor to growth (compared with a surplus of USD 12.1 billion the previous year), adding 1.6 percentage points to overall growth. However, total merchandise imports and exports fell by 6.6% from the previous year, with exports down 4.4% and imports down 8.9%. The large trade surplus actually resulted from import growth being lower than export growth. According to statistics over many years, imports of production inputs account for 60%, imports for gross capital formation account for more than 30%, and imports for final consumption account for just under 10%. Thus, a sharp decline in import growth also indicates that production is facing severe difficulties, particularly in the next production cycle. Scaling Back Production While Awaiting Opportunities On the aggregate supply side, agriculture, forestry, and fisheries continued to serve as a pillar of the economy in 2023, growing by 3.83% (compared with 3.36% in 2022), while industry faced numerous difficulties amid declining global aggregate demand. Value added across industry increased by only 3.02% in 2023 over the previous year, the lowest growth rate in the 2011\u20132023 period. Manufacturing, the mainstay of industrial production, grew by only 3.62%, also its lowest rate in the 2011\u20132023 period. The manufacturing sector remained weak for most […]<\/p>\n","protected":false},"author":9,"featured_media":35714,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[724],"tags":[],"class_list":["post-76859","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-information"],"acf":[],"_links":{"self":[{"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/posts\/76859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/comments?post=76859"}],"version-history":[{"count":0,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/posts\/76859\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/media\/35714"}],"wp:attachment":[{"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/media?parent=76859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/categories?post=76859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/neu.edu.vn\/en\/wp-json\/wp\/v2\/tags?post=76859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}