Policy Options In Vietnam’s Current Context
25/08/02021 08:40

Abstract: 

Recently, there have been ideas of experts and specialised agencies that Vietnam’s aggregate demand management policy should be further promoted, and that there should be measures to increase the aggregate demand. In reality, the level of impacts of demand in short term depends on the supplying capacity of the economy. If the capacity is low, the aggregate demand stimulation may lead to the increase in commodity prices and trade deficit, and the actual output may not change much. Conversely, if Vietnam’s potential growth rate is improved, it will be possible that the final aggregate demand stimulation will actually augment the output, as mentioned in Keynes’ theory. This research quantifed the influence of domestic final demand side factors on output, import, value added based on 2 Vietnam’s input output tables (I/O table). A specific calculation of impacts of factors of demand on output, outcome, and import carried out for a clearer picture of pervasiveness of final aggregate demand toward production can be considered an important base for our policy recommendation.

 Keywords: Policy; economic, Input – output table; Final demand; Income; Impact.

I.        Introduction

Recently, there have been ideas of experts and specialised agencies that aggregate demand management policy should be further promoted, and that there should be measures to increase the aggregate demand. Particularly, the National Financial Supervisory Commission (NFSC) persistently states that business sector is facing difficulties due to low aggregate demand for investment and comsumption. Hence, the aggregate demand of the economy must be stimulated. In terms of consumption, although the gross retail level and sales of consumption service have increased higher than that in the same period of 2013, the improvement level still remains quite low. In the meantime, the increase in commodity transportation volume in the first 7 months of 2014 (4.8%) is lower than that of 2013 (13.7%). As evaluated by the NFSC, the low aggregate demand causes difficulties in commodity consumption. Hence, the average turnover of listed enterprises in Quarter II/2014 decreased by 22.6% year-on-year. Besides, the increasing in input cost hinders the business sector to lower the selling prices to address the issue of consumption. 

When it comes to investment, as estimated by the NFSC, in June 2014, private investment takes up 10.3% GDP yearon-year. Meanwhile, FDI in the first 7 months of only increase by 2.3%, compared with that of the same period last year (6.4%). 

As forecasted by the NFSC, if there were no effective aggregate demand stimulation measures, the growth rate in 2014 could only remain at 5.6-5.7%. Hence, long-term growth depends on aggregate supply, along with the improvement of labour productivity and quality of the economy. However, while increasing aggregate supply takes a considerable amount of time to lay influences, the demand must be properly maintained.