JOURNALIST: - Sir, how do you assess the future economic prospects and resilience of the economy once the Covid-19 pandemic is brought under control?
Dr. NGUYEN TRI HIEU: - I think that if the current Covid-19 pandemic lockdown scenario is prolonged any longer it will certainly sink the economy into a deeper crisis. In the best case scenario, if we are able to control the spread of the disease by the end of June, the economy can well recover again because of the government's support packages that have been launched of late. But in the worst case scenario, if the pandemic does not pass over for the next several months, then surely the economy will bear a severe brunt. In such a scenario, any Government support package will not be sufficient. Plying relief measures into the market at that time will prove very ineffective because production and business activities will not be functioning efficiently. Pumping large amounts of money into circulation while having no products, will only escalate inflation.
I cannot be too optimistic, but I still hope to see the best economic scenario. The Covid-19 pandemic is expected to be under control by June and then only will the economy begin to regain a growth momentum. Overall growth for the year may be 4.0% or more, but in other aspects, even when the pandemic subsides in Vietnam, production and businesses will still take time to stabilize again. The global pandemic situation is at present quite volatile and many large export markets will not be fully functional for some time, even if the markets open again. This will affect our economy, as Vietnam is dependent on exports. When production fully recovers without an output market, it will cause many obstacles for businesses. Therefore, when considering the overall situation, in my opinion, the GDP growth target for this year will be very difficult to be realized, and we should prepare to readjust it accordingly.
- Sir, there is one opinion that saving businesses must be the topmost priority at this time. What is your opinion on this matter?
- I absolutely agree with this viewpoint, because in any economic crisis, keeping businesses afloat and not allowing bankruptcy to set in leads to success. Like in a battle, we need to hold our forces together. The forces here are the people, the workers, and our production units. So the solutions to saving the economy lies in taking care of our workers and our businesses.
Currently, the Government has announced three major bailout packages. A credit package for VND 300,000 bn; a fiscal package for VND 180,000 bn; and a social security package for VND 62,000 bn, all totaling to VND 542,000 bn, equivalent to 8% of the country’s GDP. This is being considered a moderate level of support for the economy, compared to the United States bailout package of USD 2,200 bn, equivalent to 10% of their GDP. But only the credit support package worth VND 300,000 bn is not actually the Government's package, but the Government has assigned commercial banks to participate with capital to support businesses.
Whatever support package is given must be done as soon as possible, and the money must go to the enterprises. This is a vital time to rescue enterprises, because if the pandemic lockdown lasts till the end of April, a lot of businesses will stop working. When many businesses leave the market altogether, it will affect the recovery process in the post-pandemic economy, due to shortage of production labor, and rapid recovery will be stunted.
- Sir, there is a view that rescuing businesses should be selective, must be divided into specific groups, and should not be evenly covered. What do you think of this viewpoint?
- Whether the economic relief packages are effective or not, I think it is important to get to the right target and the right objective. Currently all manufacturing enterprises desperately need capital to continue to function. For real estate businesses, I think there should still be support packages, but these also need to be classified into specific groups. Since 2019 the real estate market has been in difficulties and will likely fall into a serious crisis in the near future. Sometimes supply exceeds demand, sometimes both are hot, and sometimes demand falls sharply. From the end of March until now, with the isolation measures implemented by the Government, the domestic real estate market has been almost frozen, and many large projects have been suspended due to lack of capital or labor.
I do not see any segment of the real estate market see a demand, except for the segment in social housing and housing for low-income people. All market segments such as luxury housing, resorts, commercial and industrial sectors are on the decline. Although we do not want to paint a gray picture, the fact is that the real estate market is struggling to survive. Therefore, investors should be careful in pouring capital into the real estate market at this time.
- Thank you very much.
