Public investment: Key to growth

In its latest economic update entitled “Making public investment work for growth” released on August 10, the WB said that a challenging external environment and weaker domestic demand are leading to a slowdown in economic growth in Vietnam. The WB forecasts that the Vietnamese economy will grow by 4.7 percent in 2023, and accelerate to 5.5 percent in 2024 and 6 percent in 2025.

The Phan Thiet - Dau Giay section of the North-South Expressway has been put into use

To accelerate economic recovery, the WB recommends that Vietnam take the initiative in implementing support policies. A flexible fiscal policy should be well implemented to ensure sufficient budget for public investment projects in 2023, while appropriate support programs, such as tax and fee reduction, should be launched to stimulate consumer demand and promote production.

“There’s room for Vietnam to take measures to promote growth. Effective implementation of major public investment projects is the key to short- and long-term growth,” said WB Country Director for Vietnam Carolyn Turk.

Sharing this opinion, Vu Hoang Quyen, WB Vietnam’s Senior Governance Specialist, said that the Prime Minister pays great attention to accelerating public investment disbursement. The WB praised the Vietnamese Government’s determination to use the capital of unfeasible projects to fund those of high feasibility. “Reallocating funds for public investment projects or withdrawing capital from stagnant ones, and allowing “payment before inspection” are a “good remedy” for public investment acceleration,” Quyen said.

According to the WB, Vietnam’s public investment, if well implemented, will account for 7.1 percent of the country’s gross domestic product (GDP) in 2023 against the 5.5 percent projection for 2022, providing a fiscal impulse of 0.4 percent of GDP to support aggregate demand. The Government plans to increase public investment in 2023 by 38 percent or 1.6 percent of GDP.

The Government plans to increase public investment in 2023 by 38 percent or 1.6 percent of GDP

In the first half of 2023, public investment disbursement increased by 43.3 percent compared with the same period last year. Despite this result, the WB said the disbursement rate has been low in the recent period, reaching merely 67.3 percent in 2022. Steps to accelerate and improve the efficiency of public investment implementation will also help address emerging infrastructure constraints to growth.

“These steps include setting disbursement targets and enforcing accountability at different intergovernmental levels for achieving them; focusing on key national investment programs such as national expressway, power transmission, and national target programs; allowing flexibility in rules related to budget allocation for the projects identified as part of the 2022-2023 Socioeconomic Recovery and Development Program; and allowing some flexibility on certain advance procurement activities before budget allocation,” said WB’s Senior Economist Dorsati Madani.