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‘Money Flow into the Market is Not Fast Enough to Stimulate Growth’

21 March, 2025

Slow inflow of money into the economy

At the workshop “Investment Opportunities in the New Context” held this morning (March 19) in Hanoi, economist Can Van Luc shared that Vietnam aims for a high growth rate of 8% this year. However, the global context poses challenges, with the world economy growing slowly and expected to reach about 2.7%, lower than the 2011-2019 period.

The two largest trading partners of Vietnam, the US and China, are growing slower than expected. Meanwhile, domestic investment and consumption remain low compared to pre-COVID-19 levels.

According to Mr. Luc, in the first two months of this year, consumption increased by only 6%, just two-thirds of the pre-pandemic level. Businesses are facing difficulties due to the trade war, high input costs, and logistics expenses, as well as uneven recovery in orders.

Dr. Can Van Luc shared at the workshop. Photo: Pham Thang.

Assessing Vietnam’s growth drivers, Dr. Luc stated that in January, exports were negatively impacted by the Lunar New Year holidays and the trade war. Although there was a slight increase in February, it was still slow, making the 12% growth target set by the Ministry of Industry and Trade quite challenging.

Regarding public investment this year, the expected disbursement is about 900 trillion VND, a 25% increase from last year. Dr. Luc emphasized that if this capital is disbursed, especially with the acceleration of key projects, it will boost the economy.

“Many people believe that Vietnam’s growth relies heavily on exports. However, consumption and investment currently contribute over 90% to our growth. Therefore, the key lies in finding solutions to stimulate and unblock these two drivers. Nevertheless, the issue lies in the slow velocity of money circulation, hindering the flow of money into the market to drive growth,” Dr. Can Van Luc remarked.

To achieve the 8% growth target for 2025, Dr. Luc suggested faster disbursement of public investment funds, swift resolution of bottlenecks in the real estate market, and the implementation of measures to stimulate consumption. He also recommended learning from China’s experience in boosting demand, streamlining administrative procedures, and promoting the private sector to create momentum across society.

Bad debt resolution: Moving towards debt forgiveness or principal-only collection

According to Dr. Le Xuan Nghia, a member of the Monetary Policy Advisory Council, banks are expected to inject about VND 2.5 quadrillion into the market this year, a substantial amount, and interest rates have decreased. However, businesses still face challenges in accessing capital due to a lack of output and collateral issues, especially with the real estate market yet to find a clear direction, which has been a significant investment destination for domestic enterprises.

Overview of the workshop “Investment Opportunities in the New Context”. Photo: Pham Thang.

To boost investment from Vietnamese private enterprises, Dr. Nghia suggested expanding export markets in terms of both quality and quantity and promoting domestic consumption, especially in housing, furniture, and tourism services. He emphasized the need for banks to proactively address bad debts by considering debt forgiveness or collecting only a portion of the principal or interest.

“It is rare to fully recover both principal and interest on bad debts, contrary to international practice, especially in this technological age. Waiting for decades to collect the entire debt affects both the banking system and the survival of businesses,” Dr. Nghia stated.

According to Dr. Nghia, to achieve the expected growth rate of over 8% by 2025, credit easing will depend on the recovery of private domestic investment. This factor will determine the pace of credit growth and, consequently, economic growth.

Duong Hung

– 11:59 19/03/2025