VINACHEM

Overcoming the negative impacts of the Covid-19 outbreak in Hai Duong and Quang Ninh provinces, economic growth in the first quarter of 2021 reached 4.48%. This is a lower level than in the operating scenario but compared to the first quarter of 2020, when the epidemic began to appear in Vietnam, this result is positive.

Basically, the Vietnamese economy is moving in the predicted direction - production and business activities have recovered; some industries such as metals, wood products and electronic components have recovered growth equivalent to the times before the Covid-19 outbreak.

The General Statistics Office (GSO) General Director Nguyen Thi Huong said that the first quarter of 2021 saw a good recovery and growth in many important economic sectors. Specifically, industry increased by 6.5% over the same period, higher than the figure of 5.1% in the first quarter of 2020, contributing 2.2 percentage points to the overall increase of total added value in the whole economy. The processing and manufacturing sector continued to play a leading role in growth with an increase of 9.45%, contributing 2.37 percentage points. The construction sector also grew well at 5.17%, contributing 0.32 percentage points. Survey results on the business trends of enterprises in the processing and manufacturing industries also showed more positive signals: 68.6% of enterprises had a more stable production and business situation in the first quarter of 2021 compared to the fourth quarter of 2020.

In addition, 85.1% of enterprises assessed that the production and business situation in the second quarter of 2021 would be better compared to the first quarter of the year. The first quarter of 2021 also saw a strong recovery in import and export activities as total import and export turnover was estimated at US$152.65 billion, up 24.1% over the same period last year. The trend of trade surpluses continues to be maintained, with six commodities reaching export turnover of more than US$ 1 billion, contributing to the country's trade surplus of US$ 2.03 billion. Textile and garment export has gradually recovered, while footwear exports showed relatively high growth.

Import turnover started to increase again, considered a positive signal of production recovery, with the reconnection of supply chains. Another signal of the production and business recovery is that budget revenue has fared well. Budget revenue from the beginning of the year to March 15, 2021 reached more than VND320 trillion, equaling 23.8% of the yearly estimate, while budget expenditure was just over VND264 trillion, equivalent to 15.7% of the estimate.

The service sector grew 3.34%, mainly thanks to the growth of retail sales of goods, reaching 6.8% over the same period, showing that consumer demand is gradually recovering. The attraction of foreign direct investment (FDI) has recovered positively. This is the first time since the Covid-19 epidemic broke out, where FDI showed positive growth. As much as US$ 10.13 billion worth of FDI was injected into Vietnam in the first three months of the year to March 20, a year-on-year increase of 18.5%. Notably, newly registered capital and total additional registered capital increased sharply, by 30.6% and 97.4% respectively, much higher than before the outbreak of the epidemic.

Growth results in the first quarter showed the drastic and timely direction and administration of the Government, the Prime Minister and the efforts of all levels, sectors, people and businesses to continue to effectively implement the dual goals of COVID-19 containment and socio-economic development.

“The covid situation in the first quarter of this year was longer than that in the first quarter of 2020, but the economic picture is brighter thanks to flexible management. The government's policy response is zoning areas of infection off immediately, ensuring enough goods, and avoiding hoarding of goods, has been effective. Even in epidemic hit areas, production was still organised in industrial zones, so industrial production activities were maintained”, according to GSO General Director Nguyen Thi Huong.

According to the operating scenario in the Government's Resolution 01 / NQ-CP on major tasks and solutions guiding the realisation of the socio-economic development plan in 2021, in order to reach a growth rate for the whole year of 6.5%, the consecutive quarters must reach growth rates of 5.12%, 7.1%, 6.71% and 6.67%, respectively.

Updating the growth scenario after the Covid-19 epidemic outbreak earlier this year, Minister of Planning and Investment Nguyen Chi Dung said that in the remaining three quarters, there must be two quarters of more than 7% growth. Thus, growth pressure is present from the second quarter with a requirement to grow by 7.19%, 0.08 percentage points higher than the operating scenario. This is a very challenging task because the growth drivers are not really clear. Consumption has not recovered strongly, while government spending is not as plentiful as last year, with no major new projects planned or projects in operation.

Although the consumer price index (CPI) in the first quarter was at its lowest level for 20 years, experts recommend being cautious about the management and regulation of prices because inflationary pressure at the end of the year was very high.

The world crude oil price is forecast to increase by about 30% in 2021 and the recovery of the world economy in general and the Vietnamese economy in particular will put pressure on the prices of many goods and services in the coming time. According to experts, the CPI is at a low level, while the budget balance is guaranteed to be favorable and help expand fiscal policy, stimulate economic growth and consider rational adjustments of the prices and charges of some goods managed by the state according to the roadmap.

However, Nguyen Thu Oanh, the Director of the Price Statistics Department under the GSO, said the Government should balance and harmonize the adjustment of prices of essential goods at the right levels and at the right time, towards ensuring people's lives, production and the business activities of enterprises. Adjusting health service prices according to the roadmap should be implemented in July and August, instead of at the end of the year as it will create inflationary pressure next year.

Notably, since the beginning of the year, the domestic retail price of petrol has been adjusted 5 times with an average increase of 11% compared to the first quarter of 2020.

Therefore, the Ministry of Finance - Ministry of Industry and Trade should closely monitor world crude oil price movements, combined with the Price Stabilization Fund, so that the domestic petroleum retail price does not rise too high.

Some major socio-economic indicators in the first quarter of 2021: Gross domestic product (GDP) increased by 4.48%; the Index of industrial production (IIP) increased by 5.7%; there were 29,300 newly established enterprises; total retail sales of consumer goods and services increased 5.1%; realized investment capital for the whole society increased by 6.3%; total export turnover increased by 22%; total import turnover increased by 26.3%; the trade surplus was US$2.03 billion ; The average consumer price index increased by 0.29%; Core inflation increased by 0.67%.

GDP growth in the first quarter of 2021 was estimated at 4.48%, not as high as expected, but demonstrating economic recovery in accordance with forecasts and the government's scenario, contributing to maintaining and improving people's sense of confidence.

All three sectors of the economy have seen good growth. The agricultural, forestry and fishery sectors continue to be a bright spot in the economy with a growth rate of 3.16%. Industry and construction also prospered, with growth of 6.3%, of which, manufacturing - the main driving force of the economy, approached double-digit growth rate as it was before the pandemic.

The service sector which was directly and most heavily affected by the pandemic also rose up with a growth rate of 3.34%. Average inflation returned to its lowest level forthe past 20 years.

Foreign investment attraction saw positive growth for the first time since the outbreak of the pandemic while the disbursement of public investment continued to increase. The monetary and credit market remained stable, something which had significantly supported the production and business activities of enterprises.

An indicator of great interest in the general economic picture is State budget revenue. Revenue from the production activities of all three business sectors increased over the same period last year, of which, revenue from the non-state economic sector soared by 22.4%.

Domestic revenue and revenue from import and export activities also reached a high level compared to estimatesand increased over the same period last year.

A good sign was that revenue from the business sector reached over 28% of the yearly estimate with the most levels in the non-state economic sector.

Although several localities are still being affected by the recurrence of the COVID-19 pandemic, production and business activities have essentially returned to normal, contributing positively to State budget revenue, showingthe increasing adaptation, resilience and recovery of the economy.

However, some important sectors of the economycontinue to face difficulties and have yet to recover.

This is the first time since 2016. That Vietnam hasrecorded a decrease in the number of newly established enterprises in the first quarter along with a decrease in the amount of registered capital while the number of enterprises suspending operation or being dissolved still remains at a high level.

The prosperity of Vietnam's economy in the first quarter was mainly contributed to by the foreign direct investment (FDI) sector. FDI enterprises dominate the import and export activities of the country with the mainproducts being the processing and manufacturing industries.

Thus, economists recommend that, during the recovery of enterprises, attention should be paid to the recovery of domestic enterprises so that they will not be inferior to the FDI sector. Domestic enterprises also need to prepare a good foundation to stand ready to rise up strongly, instead of ending up in a state of disarray.

The impressive growth in 2020 and the first quarter of 2021 has shown Vietnam’s ability to control the crisis caused by the COVID-19 pandemic and to turn the crisis into an opportunity and successfully implement thecountry's dual goals.

This is an important foundation for our country's economy to recover after the pandemic, aiming to become a fully developed country.

Along with short-term policies being implemented to reduce the negative impact of the COVID-19 pandemic, domestic and foreign research organisations recommend that Vietnam should persevere with long-term reforms to drastically improve the macro foundation and reduce riskin the future.

Long-term solutions should be implemented with the highest levels of determination and a focus on renewing agrowth model based on technology and innovation; encouraging entrepreneurship; improving institutions towards respecting and protecting equality among all economic sectors; promoting the private sector; and others. - VNN-