He noted that while interest rates in 2024 are expected to be challenging to further reduce, there is a call for continued reductions in taxes and fees. Strong solutions are imperative to prevent a slide into a period of low growth.
JOURNALIST: - Sir, the GDP growth in 2023 fell short of the set target. What is your perspective on this issue?
Associate Professor Dr. VŨ SỸ CƯỜNG: - The estimated GDP growth rate for 2023 is 5.05%, closely aligning with expert forecasts and remaining within the scenarios outlined by executive agencies. Although the target was not met, achieving a 5% growth rate is relatively high compared to many countries globally and in the region. This level is considered acceptable, especially given the challenging external conditions. From a positive standpoint, it reflects resilience in the face of adversity.
Looking at it from another angle, the consistent growth reveals strong short-term fluctuations with a concurrent decline in long-term growth or potential growth. The average growth rate has decelerated over different periods: 1991-1999 at 7.8%, 2000-2011 at 7.6%, 2011-2019 with a decrease to 6%, and from 2020 to the present, an increase of only 4.9-5%. This poses a significant challenge to sustained economic development.
- Sir, interest rates and inflation significantly influence investment decisions. How do you foresee inflation and interest rates?
- In the context of global challenges with rising interest rates and high inflation, which put considerable pressure on the country, 2023 witnessed effective control of inflation at 3.25%, surpassing the target set by the National Assembly. Macroeconomic stability was maintained, with interest rates consistently lowered to their current low levels. Looking ahead to 2024, global interest rates are expected to remain stable or decrease, and inflation is projected to decrease as well. Therefore, the domestic inflation forecast should stay within the established target.
Reviewing the broader period, long-term inflation appears to be on a downward trajectory, indicating improved control over inflation trends. In the years leading up to 2013, our inflation rates exceeded the global average. From 2014 to 2020, inflation levels were on par with the global average, and now, from 2021 to 2023, our country's inflation has been lower than the global average. This trend underscores more effective inflation control in recent times.
Regarding exchange rates and interest rates, I anticipate that exchange rates will continue to remain stable, and interest rates will stay relatively peaceful. This stands as a noteworthy success and demonstration of resilience amid external pressures of high-interest rates and exchange rates.
In 2024, the US Federal Reserve (Fed) has signaled a commitment to not raising interest rates and may even consider reducing them. Consequently, the pressure on domestic interest rates has eased, and with low credit growth, it is improbable for interest rates to rise. However, reducing interest rates further poses challenges, as it must ensure positive real interest rates. In other words, if deposit interest rates drop significantly, funds may shift towards stocks, real estate, and gold.
The difficulty in further interest rate reductions lies in the need to maintain exchange rate stability, where interest rates play a crucial role. Additionally, interest rates are linked to capital flows. If domestic interest rates are excessively low, capital outflows may occur, exerting pressure on exchange rates. Therefore, the likelihood of substantial interest rate reductions in 2024 is minimal. If any reduction occurs, it would likely be marginal, as lowering rates significantly would introduce various risks.
- In 2024, a substantial amount of corporate bonds is due for payment. Many suggest extending the bond payment time. What is your opinion, sir?
- Following various challenges in 2022, the bond market has stabilized. In March 2023, the Government issued Decree 08/2023/ND-CP, allowing for the extension of payment time, asset swaps, and mortgage liquidation. Since its implementation, the bond market has exhibited more positive signs, and in 2023, we successfully delayed the debt settlement process. However, it's important to note that Decree 08/2023 is set to expire on January 1, 2024. The volume of bonds maturing in 2024 is significant, reaching up to VND 700 billion. This includes VND 345,000 billion in bonds due in 2024 and an additional VND 250,000 billion from 2023, for which debt repayment has been postponed. Meanwhile, many bond-issuing businesses are facing a shortage of cash flow.
If the maturity period of the bonds is extended and certain provisions of Decree 08 continue to be implemented, following the principle of market facilitation in 2024, it could instill confidence in the bond market. Conversely, if the payment time is not extended, bond issuers will need to attract a considerable amount of money in the currency market to meet their bond obligations. This could lead to substantial issues with interest rates, akin to those encountered in 2022, thereby exerting pressure on the currency market. A decline in the bond market would introduce significant economic challenges, and the associated capital pressures could burden banks.
- To stabilize macro-finance and avoid falling into low growth, what solutions need to be implemented, sir?
- In my opinion, it is essential to implement solutions that boost both the total supply and total demand of the economy. To bolster demand, the initial step is to incentivize fair investment disbursement through robust measures, such as establishing a monetary reward and punishment mechanism.
Secondly, there should be efforts to stimulate domestic consumption, which can be achieved by broadening the eligibility for social housing purchases. Ongoing wage reform and salary increases can further fuel consumption, thereby contributing to an increase in aggregate demand.
Thirdly, the continuation of reducing certain taxes and fees is crucial to supporting businesses and further stimulating demand. The National Assembly's agreement to extend the reduction of VAT by 2% until June 30, 2024, is a judicious policy, and if deemed necessary, consideration could be given to extending it until the end of 2024.
- Thank you very much.
