Possible Measures To Support Economic Growth in 2020 and Beyond

• The Government could guarantee loans made by banks to SMEs
• Infrastructure spending would support employment and boost future growth
• Some garment firms need help converting to make Personal Protective Equipment
• The Government can promote Vietnam’s nascent Clinical Research Outsourcing industry
• Unfreezing the real estate industry will help meet pent-up demand and boost growth
• The MPI can take steps to boost future, high-value FDI inflows

Vietnam’s Government has managed to “flatten the COVID curve” (meaning that the daily number of active COVID-19 cases has been flat/declining for weeks), and the country is starting to lift the public health measures that helped achieve that positive result. However, those same measures have had a significant impact on Vietnam’s economy, and the Government has announced a variety of fiscal measures to mitigate the impact of COVID-19 on Vietnam’s economy.

Those fiscal measures, which have been discussed at length in other articles, are more-or-less comparable to the measures that governments around the region have also enacted, including: cash payments to individuals and households over the next 2-3 months that are of a similar magnitude across the region, modest tax breaks, and varying degrees of electricity price cuts in some countries. In addition to these measures, we believe there are several other ways that Vietnam’s government can drive economic growth in the short-, mid-, and longer-terms.

Funneling Credit to Small and Medium Enterprises (SME)

The State Bank of Vietnam (SBV) has also enlisted the cooperation of commercial banks to help support local businesses by extending loans with below-market lending rates. The economic impact of those concessionary loans will be borne by the banks themselves.

Thailand is also augmenting its fiscal measures by helping to channel credit to businesses, but the country’s central bank is partly subsidizing the loans that the country’s commercial banks will extend to small businesses. Thailand’s central bank also launched a USD12 billion fund to buy investment grade corporate bonds issued by local corporations.

Vietnam’s commercial banks have reportedly restructured USD44 billion of loans made to COVIDimpacted businesses, and extended USD22 billion of new loans to such businesses at concessionary interest rates at the behest of the SBV. Despite these initiatives, many companies are reporting that they have been unable to access loans they need to fund their working capital and/or to pay salaries during this difficult time. Banks are apparently reluctant to lend to some of those businesses out of fear of not being repaid.

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Source: https://vinacapital.com/news/