Three scenarios to forecast HCMC’s growth

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The three economic growth scenarios mentioned above in the study “Creating momentum for economic recovery in Ho Chi Minh City in the 4th Covid-19 period” have just been announced by the University of Economics and Law and the Research Institute for Banking Technology Development, Ho Chi Minh City National University.

The scenarios are given in the context that the city has recorded 251,414 Covid-19 patients, ranked first in the country in the number of infections, and more than 10 million people in the city enter the final day of the tightening of social distancing measures lasting 15 years. days with the principle of “anyone is somewhere”.

With the reopening of economic activities from September 15, Ho Chi Minh City’s GRDP is expected to decrease by about 0.85% compared to 2020.

The research team made three forecasts on the economic growth scenario of HO CHI MINH CITY this year. Scenario 1 (expected), the city basically controlled the epidemic until September 15 and added 2 weeks of buffering before establishing a “new normal” from October. At the time, grdp was estimated to be down about 1.74% from last year.

With scenario 2 (bad), if the epidemic lasts until the end of September, the “new normal” is established around the late second half of October. The economic damage is very severe, estimated GRDP this year, it will fall deeply by 13.48% compared to 2020. The economy is easy to fall into a recession.

In scenario 3 (good), when the epidemic situation is better controlled than the one in scenario 1, accompanied by adequate and thoughtful preparation for ending the distance, restarting activities right from the start. 9/15. Accordingly, it is estimated that GRDP will decline by about 0.85% compared to 2020.

These scenarios are designed based on 4 platforms with updated input parameters until the end of August 2021, including: the ability to control the epidemic; the city’s economic structure (the structure of GRDP by sector, the structure of the city’s budget revenues); economic vulnerability, by industry and sector; economic recovery is expected thanks to support packages (demand stimulus, job creation, education stabilization, public and private investment stimulation…).

Overall, this study is based on two assumptions. First, HO CHI MINH CITY and neighboring provinces basically controlled Covid-19 for the fourth time in September so that they could return to operations under “new normal” conditions in October. Secondly, the vaccine continues to be deployed on a large scale so that by the beginning of the fourth quarter reach the coverage of 70-80% of the population of the city and neighboring provinces are given 2 injections. By December, basically 70-80% of Vietnamese people are vaccinated at least one shot.

According to the research, the economy of Ho Chi Minh City has suffered serious losses during the period of isolation: great losses of individuals and households; labor and employment declined sharply; financially distressed businesses.

“Without timely state intervention, the unemployment rate of HO CHI MINH CITY and the southern region will increase sharply in the near future. In addition, the speed of economic recovery of the city depends largely on the speed and scale of the support dynamics from the Government and HO CHI MINH City,” the expert group commented.

Research also shows that, in order for the support policy to be effective immediately, it is necessary to prioritize the speed of support and accept a certain deviation in the beneficiaries. Support packages focus on two directions.

The first is to directly support aggregate demand by cutting taxes, increasing investment spending, spending on job support, spending to support essential consumer needs, and ensuring social security. Next is financial support for businesses, cost sharing, guarantees and loans, providing low-cost capital flows.

Specifically, the research team believes that supportive policies should aim at the following objectives: Ensuring social security for individuals and low-income households who are seriously injured; long-term support for households with children of school age experiencing particularly severe trauma; increase employment ability and self-stabilize income of disadvantaged people.

For production and business, it is necessary to overcome the consequences of production disruption, stabilize the supply chain, and increase regional connectivity; liquidity support, low-cost loans; share the cost burden of the business; limiting layoffs; stimulating demand, stabilizing and developing the market; increase the self-recovery ability of small businesses, individual business households and enterprises.

Regarding the state budget, create a timely budget to accelerate public investment and promptly deploy support packages of sufficient size; maintaining a stable growth rate, contributing to a positive budget balance in 2022.

The role and position of Ho Chi Minh City in the southern key economic region as well as the whole country is very important. Therefore, the research team believes that resource support from the central budget needs to play a key role, including immediate support in the short term and structural support when the gap ends and continue in the medium term.

In addition, in order to create restoration for the city, the research team proposed the National Assembly and the Government to apply a specific mechanism to create motivation, to help the recovery process take place as quickly as possible, creating a ripple effect for the whole region.

One of the solutions is to issue government bonds in the condition that government bond interest rates are low and transfer this capital to Ho Chi Minh City for use with the responsibility of paying interest, which is considered feasible. and return on investment.

From 2022, this group of experts proposed the Central Government to allow to increase the rate of budget regulation from 18% to 23% and allow to raise the public debt ceiling of the city so that it can issue municipal government bonds, so as to have enough resources for development investment.

In parallel with the policy from the central government, Ho Chi Minh City needs to create momentum through the job-regeneration support package by supporting 25% of the regional minimum wage for businesses to maintain the employment rate threshold. Establishing a new stimulus program on the basis of the interest rate support program that has been very successful for many years, building an online wholesale market, improving the capacity of the health system, accelerating digital transformation and linking region.

The team specifically emphasized that the expected scenario can only be achieved provided that synchronous and consistent implementation of the policies to support economic recovery that the group has proposed, including ensuring security, education, job regeneration, stimulating consumer demand and stimulating investment back from the private sector. Economic solutions must also be in sync with other policies such as health, epidemic prevention, vaccination … To achieve consistent efficiency throughout.

Source: – Translated by