Dr Vo Tri Thanh: Four constraints for long-term economic growth

By Thu Phuong - Sep 21, 2017 | 07:46 AM GMT+7

TheLEADERAccording to Dr Vo Tri Thanh, the greatest concern now is how to reach the target of 6.7% as the short-term growth target of 2017 while not breaking the commitments for long-term growth.

Dr Vo Tri Thanh: Four constraints for long-term economic growth
Economist Vo Tri Thanh.

At the workshop themed "Ensuring the consistency in policy adjustment to meet growth targets", organized by the Ministry of Planning and Investment (MPI), economist Vo Tri Thanh, former Vice President of Central Institute for Economic Management (CIEM), said that the current concern is how to meet short-term growth targets without contradicting to long-term development.

We are currently having four constraints for growth. First, it is the budget. Second, it is the political reform of the State’s management system. Third, it is our wish to grow and restructure at the same time, which evokes the long-lasting difficulties of resource distribution. Fourth, it is the macroeconomic stability, which is essential to economic growth. Vietnam's macroeconomy has not grown steadily regarding the balance of international payments, forex reserves and the health of the banking system.

According to Vo Tri Thanh, we have to “choose wisely” and "be skillful", as these four constraints are the driving force for long-term economic growth. Being skillful means achieving our growth goals without breaking the commitments for long-term growth.

“Hence, in my opinion, there are two things. First, the "forecasting” ability. For example, if the State wants to increase VAT, they should assess the impacts to create the sound basis for researching. Raising taxes is inevitable. We have to set goals for each stage and predict the future, "Thanh said.

Second, the growth target can fluctuate with four constraints, but a back-up plan must be taken into account. "For example, we suggest increasing credit growth gradually from 15 to 18, 21%, a significant impact on the macroeconomy may not appear immediately due to the lag in policies. However, when the 25% target is met, decreasing to 17% is very difficult," Thanh explained.

Is there a way for Vietnam to meet both short-term and long-term growth targets? According to Thanh, the first one is integration. The world is now very open so that we can take advantage of markets, investors, technology, which is is a big opportunity for Vietnam.

To do this, Vietnam needs to reform its business environment and taxation policies, along with removing barriers for businesses. Therefore, apart from revising the existing policies, it is necessary to prepare for the coming ones. Hence, we can attract new resources from the private and foreign investment sector, creating opportunities for Vietnam's economic growth.

Agreeing with this opinion, Tran Quoc Phuong, Director of National Economic Issues Department (MPI), emphasised the need for effective solutions to achieve growth targets in the context of a limited budget. To achieve the 2017 goal of 6.7%, besides the joint effort, it is necessary to make full use of all opportunities to promote the growth, but still pay attention to sustainable development, competitiveness, and growth model innovations.

Phuong noted some primary solutions to be flexible financial and monetary management, inflation control and currency stabilisation. Regarding short-term growth, we should take advantage of both international and domestic opportunities to boost production, especially manufacturing and processing industries; stimulate export and import; develop tourism; strengthen services; accelerate the disbursement of FDI and private capital. Regarding long-term growth, we should restructure the economy.