Vietnam government upbeat the public investment in 2020

23-Jan-2020 Intellasia | Nhip cau Dau tu | 6:02 AM Print This Post

According to data from KB Vietnam Securities Company (KBSV), the State budget overspending in 2019 continued the downward trend at 3.4 percent of GDP.

Tax revenues show positive progress, increasing by four percent in 2019. Preliminary data in 2019 shows that revenue from value-added tax (VAT) and corporate income tax (CIT) increases by nearly 10 percent thanks to better tax management. Revenue from personal income tax (PIT) has rose by nearly 20 percent thanks to the expansion of the tax base.

Total state budget expenditure almost remained unchanged from the previous year. Notably, interest payment pressure increased by nearly 14%. Meanwhile, the bottlenecks, tightening disbursement of public investment have curbed government spending during the year.

Reasonable budget deficit, at a level lower than the GDP growth rate, helped reduce the public debt to GDP ratio (%) to 56.1%, the lowest level in the last six years.

The Ministry of Finance said that about 10.3 percent of the government’s domestic debt portfolio would be due. These were five-year government bonds issued in two years from 2015 to 2016. Since 2017, the terms of government bonds had been extended and more appropriately distributed, spanning for 15, 20, and 30 year terms.

Even so, Vietnam’s debt repayment capacity was guaranteed, as shown by the annual direct debt repayment ratio that accounted for 15-16 percent of total budget revenue, still below the national regulatory and recommendations ceiling of 25%. Moody’s downgrade of national credit ratings only related to government-guaranteed debt obligations, which, according to the Ministry of Finance, was due to the inconsistency in administrative coordination to pay contingent liabilities.

Along with that, the application of GDP data according to the new calculation method from 2020 will help reduce the public debt to GDP ratio, creating more room for issuing more bonds, thereby helping the government to have more room for swaps and opportunities and debt restructuring.

Favourable interest conditions help reduce pressure on government borrowing costs. The government interest rate level for long terms is falling to a record low.

Regarding public investment, this securities company has an optimistic view on the feasibility and progress of public investment disbursement in 2020.

KBSV thinks that the recently passed Public Investment Law is expected to address weaknesses in the public investment management system.

In addition, a series of national key projects are paid special attention by the government, including two major projects, North-South expressway and Long Thanh airport, which are expected to be implemented in the 2020.

In addition, improving the tax system enables the government to continue increasing tax revenues, thereby creating a fiscal space for spending. Recently, the government has increased the arrears of transfer pricing businesses such as Coca-Cola with 821 billion dong and Heineken with 917 billion dong.

The two groups expected by KBSV to benefit from this factor are construction materials (providing raw materials for government construction projects) and construction groups (directly participating in bidding for construction projects of transportation infrastructure).


Category: Economy, Vietnam

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