According to analysts of VNDirect Securities, major growth drivers were slowing down. Specifically, exports were under pressure as global demand dropped and FDI also saw significant decline in registered capital (down by 20.9% to US$8.6 billion in the first quarter).
“COVID-19 entirely changed the macro-economic landscape. We believe that public investment will play a very important role in accelerating economic growth this year as other drivers slow down,” VNDirect Securities wrote.
VNDirect forecast Vietnam’s gross domestic product (GDP) to expand at five percent this year.
VNDirect said that the Government was sending strong signals about accelerating public investment disbursement this year.
Disbursement of public investment rose by 16.4% to reach VND59.5 trillion in the first quarter, or 13.2% of the plan for the full year.
In the 2021-22 period, the Government would increase public investment by 8.2%, higher than the Government’s GDP growth target set at 6.1% for 2020.
Budget deficit would be allowed to increase to 3.5% of GDP in 2021-22, from the planned rate of 3.4% of GDP in 2020.
According to a report by the Ministry of Finance, public investment was planned at VND700 trillion this year, 2.2 times higher than the realised capital in 2019.
It was estimated that if all budgeted public investment was disbursed this year, GDP this year would increase by 0.42 percentage points. Public investment would focus on improving infrastructure.
Meanwhile, VNDirect said, component projects of the North-South Expressway would be the focus of public investment. Earlier this month, Prime Minister Nguyen Xuan Phuc agreed to change the investment model of eight projects of the North-South Expressway from public-private partnership to State-invested.
Thus, all 11 component projects of the North-South Expressway would be State-invested.
The Prime Minister also urged localities to focus on speeding up land clearance for these projects so that construction of some could be started in the third quarter of this year, instead of the first quarter of 2021.
Enterprises which produced and supplied building materials would benefit from the speeding up of public investment disbursement, VNDirect said.
VNDirect estimated that around 40% of public investment would be spent on 11 component projects of the North-South Expressway and My Thuan – Can Tho Highway.
Accordingly, the construction would need asphalt worth around VND8.9 trillion, construction steel worth VND7.6 trillion and cement worth VND3.8 trillion. Demand for construction stone would also increase to around 30-35% of the capacity of producers.