HCMC’s gross domestic product (GDP) in the first quarter of 2023 has grown by 0.7%, the lowest among Vietnam’s five centrally-governed cities, according to the General Statistics Office. Mr. Michele D’Ercole, the President of the Italian Chamber of Commerce in Vietnam (ICHAM) advised some solutions for HCMC’s economic recovery in an executive interview.
Vietnam’s GDP growth in H1/2023. Source: GSO
HCMC recorded lower-than-expected gross regional domestic product (GRDP) growth in the first quarter of 2023, the lowest since 1982. What is the main reason for this weak growth from your point of view?
The main reasons for HCMC’s low growth rate is the global economic recession and inflation have affected all economic sectors, hindering recovery such as inflation, bank liquidity, cash flow, exchange rates, interest rates and the real estate market.
The economic growth rate of HCMC has been influenced from external factors that the city government cannot control directly. It is normal that the most developed areas of a country grow less, after reaching certain standards, but, as HCMC is perceived abroad as the showcase of Vietnam’s development, this is not a good message.
The “blazing furnace” policy implemented by the central government has also had a two-faceted impact: on the one side, it had the effect of stopping a number of initiatives, but on the other it was a well-deserved clean-up.
Is it the domino effect from the macroeconomic factors that causes the negative growth in logistics, real estate and healthcare industries in HCMC?
The real estate, stock and bond markets are all facing obstacles this year amid tightening monetary policy. A number of enterprises have also reported a lack of export orders due to weak global demand. So yes, all these facts impact on logistics sector and healthcare industries. Like in other fast developing economies, domestic consumption and development are not keeping up with the pace of industrial output. Therefore, with little purchase power internally and lower order from abroad, these industries suffer.
What should the HCMC government do to promote the strength of the business and the entrepreneurs to improve the economic growth during this period?
I think the HCMC government is to promote the strength of the business and the entrepreneurs to improve the economic growth during this period. The economy will need to be supplied with capital amid the tight monetary policy. For example, it was implementing a program to link up lenders and firms to provide the latter with loans.
However, it is not really a matter of “promoting”, but rather of implementing the right policies for a long-term and sustainable growth of the city for the benefit of all. On top of emergency measures to help those in real need.
Mr. Michele D’Ercole, the President of the Italian Chamber of Commerce in Vietnam (ICHAM)
Is it time to promote the public investment also?
A slowdown is an excellent time to rethink strategic matters, such as transportation (traffic management, alternative means of mass transportation), connectivity (digital, naval and airborne), services (digitalization of the public administration, centralization of public services), training (requalification of people to skill up for higher-demand jobs, other educational programs etc.), fight against pollution (building / upgrading modern and efficient infrastructures such as sewages, building of charging stations and eco-friendly construction materials factories, etc.).
One of the most important tasks is speeding up its public spending. Secondly the city should incentivize investments that generate long-term returns for the city, through tax holidays and simplified procedures.
For groups of industries that are experiencing negative growth, what specific actions should the city take to revive the growth?
I think the Government can step up measures to address the problems such as supporting businesses to access capital. And also taking the advantage of tourism opening to attract more international visitors to Việt Nam, especially HCMC.
Thank you.