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Economist Associate Professor Dr. Dinh Trong Thinh participated in an interview with Bao Cong Thuong reporters about this issue.
Recently, many experts have suggested that in this new economic context, stimulating aggregate demand is a critical factor; what are your comments on this matter?
Indeed, increasing aggregate demand is essential to reducing inventory, boosting business production, and exporting in the context of the economy. For this reason, we need to prioritize finding orders from nations around the globe to boost the export of commodities. Notably, at this time, new orders for many businesses only extend until June 2024, making the search for new orders all the more crucial.
Regarding public investment, in 2023, we attained only 93.5% (short of the 95% target set by the Prime Minister), but this represents a significant effort because the amount of public investment in 2023 saw a 23% increase compared to 2022.
In 2024, the public investment capital will be around 657 trillion VND. Although this figure is lower than in 2023, it nevertheless constitutes a substantial sum. However, the more pressing concern is that the execution of public investment this year is expected to face greater challenges. The reason is that we have decided to start building expressways in the Mekong Delta, which poses a challenge because that region has weak soil conditions and a lack of soil mines to support land development. Therefore, this also presents one of the obstacles to public investment in this year of 2024.
Hence, finding solutions to overcome these obstacles and secure necessary materials and elements to expedite land clearance is necessary to boost public investment. Only then can we achieve the desired target of a capital disbursement rate of 95% in 2024.
Regarding domestic consumption, in the first quarter of 2024, it showed a growth rate of nearly 9%. While this may not be a particularly high figure, it does represent an improvement compared to 2023. However, it’s worth noting that in the past, the domestic consumption rate has reached almost 20% in some years. As such, finding ways to stimulate domestic consumption is another issue of great importance.
Economist Associate Professor Dr. Dinh Trong Thinh
Of course, the Government and various Ministries and branches have already implemented certain solutions to boost domestic consumption. These include a 2% reduction in value-added tax, a reduction in various fees, charges, and land rents; however, the impact of these measures has been rather slow. Therefore, in order to accelerate domestic consumption, in addition to government solutions, businesses must lower the cost of their products, reduce their sales prices, and implement promotional programs to maximize sales.
Despite all this, optimizing sales is also contingent on other factors, including income. As we know, in 2023, the income of workers was affected, and many segments of the population experienced stagnant or minimal income growth. As a result, consumers are being more conservative with their spending. Consequently, increasing the income of workers is also essential for stimulating domestic aggregate demand.
Based on the economic and social achievements from the first quarter of 2024, what is your economic forecast for the second quarter?
I am of the opinion that during the second quarter of 2024, the economic situation in Vietnam will improve. This is because, in the first quarter of 2024, we achieved the highest economic growth rate in the last five years.
This is a remarkable accomplishment. Moreover, along with the controlled inflation, the number of newly established businesses has also increased compared to the same period last year, and foreign direct investment has also shown an uptick. Therefore, we can look forward to the second quarter experiencing better economic growth (GDP).
Improved economic growth will have a positive feedback loop, leading to higher incomes for the population and increased demand for production inputs, thereby increasing domestic aggregate demand. This sort of effect is akin to a ‘communicating vessels’ scenario.
Regarding commodity exports, what are your expectations for this second quarter?
In my opinion, the export situation will continue to be positive in the second quarter of 2024 and may even improve because export orders for businesses are still increasing.
In fact, at present, many businesses have secured orders that will last until the third quarter. Therefore, we can also expect higher commodity exports in the third and fourth quarters, creating even more favorable conditions for exports.
Particularly noteworthy is the export focus market, the United States, which is experiencing strong consumer demand. In the first quarter of 2024, Vietnam’s exports to this market exhibited excellent growth.
According to data from the Ministry of Industry and Trade, in the first quarter of 2024, the United States was Vietnam’s largest export market with an estimated turnover of 26.06 billion USD, representing 28% of the country’s total export turnover and demonstrating an increase of 25.5% compared to the same period last year (in the first quarter of 2023, it had decreased by 21%).
The United States is also taking steps to promote trade activities between the two countries. Furthermore, Vietnamese businesses have become better acquainted with the requirements and regulations of the export market. Hence, I predict that Vietnam’s export activities in the second quarter of 2024, and indeed throughout 2024, will show a surge.
Thank you for sharing your insights with us!
