GDP growth expected to be 5%, overspending 8%

VietNamNet Bridge – At the first online cabinet meeting on March 30, Prime Minister Nguyen Tan Dung said that with a first-quarter GDP growth rate of 3.1%, the lowest level in many years, the government might have to ask the National Assembly to reduce the expected GDP growth rate to 5% and increase the scheduled state-budget overspending to around 8% for 2009.



Previously, the expected GDP growth rate was set at 6.7%. At the cabinet meeting in October 2008, the Government said it would try to maintain the GDP growth rate at 6.5% in 2009 and slash overspending to 4.3%, compared to 4.8% of 2008, through cutting down regular expenditures.



In late December 2008, at the National Assembly Standing Committee’s session, Finance Minister Vu Van Ninh admitted: “The impacts from the global economic crisis came earlier and quicker than the forecast made at the 4th National Assembly session. At that time, the National Assembly’s resolution noted that the expected GDP growth rate for 2008 was 6.7%. At the cabinet meeting in November 2008, the Government still said that the GDP growth might reach 6.5%. But statistics by December 23 showed that the figure was 6.23%”.



“The growth rates for all major economic fields fell very quickly in the last three months of the year. The situation seems to be very bad, with mutations in every area,” Ninh spoke to the National Assembly Standing Committee.



Tax reduction suggested



At the cabinet meeting on March 30, the Chairman of the National Financial Supervision Committee, Le Duc Thuy, said that the GDP growth rate of 3.1% in the first quarter of 2009 is the bottom point. The figure will increase in the coming time.



Related to the proposal of adjusting the expected GDP growth rate for 2009, Thuy said that it is very good if Vietnam gains a growth rate of 5% this year. The change of planned GDP growth rate is not meaningful in terms of theory but it will have a positive impact on budget estimations and the government’s spending.



The inflation rate in the first quarter is also lower than forecasted; Thuy suggested lowering the lending interest rate from 8% to 6%, to encourage economic sectors.



Minister of Planning and Investment Vo Hong Phuc put forward groups of solutions to encourage economic growth, such as concentrating investment in key projects, quickly disbursing official development assistance (ODA), issuing government bonds, cutting down lending interest rate to support enterprises, particularly the mechanical engineering industry and export.



Minister of Finance Vu Van Ninh asked the government to help enterprises by reducing value added tax (VAT) to yarn, fabric, garment, and construction materials; automobile and motorbike industries; cutting down and exempting corporate income tax for small and medium enterprises; and exempting personal income tax for low-income earners.



Ninh said the government would slash corporate income tax within nine months for enterprises that have capital of less than VND10 billion or less than 300 workers; reduce the corporate income tax rate by 30% for textile-garment, footwear and mechanical engineering enterprises, or extending the deadline for financial duties for importing enterprises. The government will issue bonds worth VND8.5 trillion to build dormitories for students.



Ninh also said that the implementation of social welfare and stimulus measures made budget revenue in the first quarter equivalent to 88% of the same period of last year while spending is up by 4.1%. If the country’s GDP this year is 5%, budget revenue will reduce by VND12 trillion.



The Finance Minister said that the government needs to increase budget revenue by relaxing or stopping ineffective projects, reducing unnecessary meetings and purchasing public assets.