Fiscal Policy for Promoting Sustainable Economic Growth in Vietnam
Author
Le Quang Minh
Abstract
This research offers a thorough analysis of the current status and function of Vietnam's fiscal policy from 2020 to 2024. It also suggests strategies for achieving sustainable growth by 2030. The study integrates theoretical perspectives from Adam Smith, Keynes, and Barro-Devarajan, and contends that sustainable economic development is fundamentally influenced by the generation of durable positive externalities by high-quality public investment in infrastructure, education, and technology. The country's fiscal policy exposed three structural vulnerabilities, despite the fact that the economy achieved significant accomplishments during the 2020-2024 period, including a cumulative GDP growth of 25.1% over five years and a reduction in public debt from 55.9% to 34.0% of GDP. First, the revenue structure was overly reliant on crude oil and import-export-related receipts. Secondly, the public investment disbursement rate only attained 70-85% of the planned level. Thirdly, fiscal reserve funds contracted by 99%. A negative feedback loop was established by these three constraints, which poses a threat to the medium-term fiscal sustainability. In order to promote sustainable economic growth, the Government of Vietnam must enforce the following measures: expand the domestic tax base, reallocate expenditures to prioritize total factor productivity (TFP)-enhancing items, institutionalize fiscal discipline through a binding deficit ceiling and an independent Fiscal Council, and coordinate fiscal policy in a coherent manner with monetary policy within an inflation-targeting framework.
Keywords
Fiscal policy, sustainable economic growth, public investment, fiscal sustainability, countercyclical policy
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References
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