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COVER STORY

Issues to address

At a recent discussion co-hosted by VET / VnEconomy, Dr. Nguyen Dinh Cung,
former Head of the Central Institute for Economic Management, looked at
barriers he believes will hamper economic growth in 2024.
By PHUONG HOA

peaking at a roundtable discussion 18.3 per cent increase in January followed businesses entering the market, only one
with the theme “Economic Outlook by a 6.8 per cent decline in February then business exited. But last year and in the
S for the First Quarter: Opening the a 4.1 per cent increase in March. Moreover, first quarter of this year, the ratio shifted
Way for the Economy in 2024”, held the Purchasing Managers’ Index (PMI) for to two businesses exiting for every new
recently in Hanoi by Vietnam Economic the manufacturing sector fell below the business entering the market.
Times / VnEconomy and the University 50-point threshold in March. “The economic As per data from the Agency for Business
of Economics and Business (UEB) at the recovery witnessed in the first quarter of Registration (ABR) at the Ministry of Plan-
Vietnam National University - Hanoi 2024 therefore lacks sustainability,” Dr. ning and Investment, there were 36,244
(VNU-Hanoi), Dr. Nguyen Dinh Cung, Cung commented. newly-established enterprises in the first
former head of the Central Institute for quarter of 2024, marking a 6.9 per cent
Economic Management (CIEM) at the Unusual fluctuations increase compared to the same period last
Ministry of Planning and Investment said Another notable irregularity lies in the year. However, in contrast, a substantial
that: “For me, as someone who has been correlation between industrial production 73,978 businesses exited the market during
an economic researcher for the past 30 value and value added during the industrial the quarter, or 22.8 per cent more than in
years, witnessing the many reforms the production process. Dr. Cung noted that the first quarter of 2023.
economy has gone through, I can say that prior to and throughout the Covid-19 crisis, Of these exiting businesses, 53,365 tem-
Vietnam’s economy is facing its biggest average growth in industrial production porarily ceased operations, over 15,500 sus-
challenges at this point in time.” value typically surpassed that of value pended activities awaiting dissolution pro-
Specifically, GDP growth in the first added in industrial production, or would cedures, and 5,100 completed dissolution
quarter of 2024 came in at 5.66 per cent be at around a similar level. formalities. On average, more than 24,000
compared to the same period last year, However, in 2023 and the opening quarter businesses withdrew from the market each
representing the highest growth in the first of 2024, value added in industrial production month. Consequently, new registrations and
quarter during the 2020-2023 period. Total significantly outpaced industrial production reactivations minus the outflow of businesses
value added across the industrial sector value itself. “Despite rising labor and material resulted in Vietnam’s total business count
rose 6.18 per cent during this timeframe, costs and stagnant sales, profits have falling by 14,000 during the first quarter of
contributing 2.02 percentage points to increased, which is perplexing,” he remarked. this year, or 4,700 businesses each month.
overall value added growth in the economy. There were noticeable shifts in the ratio According to Dr. Cung, the growing num-
However, the growth pattern of the Index of businesses entering the market against ber of businesses exiting from various sectors
of Industrial Production (IIP) fluctuated those exiting during the first quarter. From indicates that significant challenges are being
month-by-month in the quarter, with an 2018 to 2022, on average, for every four faced by enterprises and the economy at

12 Vietnam Economic Times May 1, 2024 en.vneconomy.vn