Economic difficulties would persist in the second quarter of the year, posing a challenge to meeting the year’s GDP growth target, the Ministry of Planning and Investment predicted.
At an online conference between the national Government and local authorities on Monday, the ministry said production and business, including industrial production, exports, and FDI attraction had not yet escaped recent economic maelstroms.
Vietnamese companies have experienced further decreases in exports, production orders, and unit prices in the first quarter of this year. Many have been reporting a lack of orders since the fourth quarter of 2022, and some are currently running at only 35-50% of their production capacity.
As a result, they’ve had to scale down all production and give workers rotational leave. Company leaders have said they expect the troubles to last at least until the end of the second quarter.
Input costs and the prices of materials are still high, which has put pressure on exchange rates and production costs. All this during a time when 90% of Vietnam’s import turnover comes from raw materials for production.
Companies have also been experiencing cash flow problems, including a shortage of working capital, and a lack of medium and long-term investments. Interest rates on deposits and loans from banks have increased, causing the cost of capital to climb and reduce competitiveness at most enterprises.
According to data from the Ministry of Planning and Investment, Vietnam’s GDP increased by only 3.32% in the first quarter of 2023, 2 percentage points lower than the same period last year. The consumer price index (CPI) rose by 4.18%.
Prime Minister Pham Minh Chinh said Vietnam’s open economy has been affected by global downward economic trends. He said the nation was currently facing more difficulties than opportunities.
It is still difficult for businesses to access capital and land, while the real estate, capital and corporate bond markets still have many problems that need to be removed for stable development, he said.
Minister of Planning and Investment Nguyen Chi Dung suggested reducing taxes, fees and lending interest rates to stimulate growth.
Vietnam managed to overcome global and domestic headwinds to achieve GDP growth of 8.02% last year, its highest in 12 years.
The country has targeted GDP growth of 6.5% this year.
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