Spraying Truc Bach Ward in Hanoi with disinfectant. (Photo: VNA)Hanoi (VNS/VNA) –Support packages from the Government and banks would contribute to partlyreducing difficulties for enterprises affected by COVID-19, but strongermeasures should be taken for the hardest-hit industries, experts said.
Prime Minister Nguyen Xuan Phuc announced at a meeting last week that a 30trillion VND (1.3 billion USD) fiscal support package would be implemented tohelp businesses cope with the coronavirus epidemic.
Commercial banks also pledged to offer a 285 trillion VND (12.39 billion USD)preferential credit package to affected enterprises, Phuc said.
According to finance expert Can Van Luc, the fiscal support package will bemade by the Government through measures such as tax breaks, delayed taxpayments and acceleration of State spending on infrastructure projects.
The Government hasn’t so far detailed the plans for the fiscal package, but itwas forecast that on top of fast-tracked public spending on infrastructureprojects, government spending will also be directed toward industries which arehard-hit by the virus. These industries include tourism, transport andagriculture.
Meanwhile, the credit support package will cover interest rate reduction anddebt payment rescheduling for struggling firms conducted by commercial banks.
"As capital for the 285 trillion VND preferential credit package comesfrom commercial banks without aid from the Government, it will not be aGovernment's stimulus package," Luc noted.
Banking and financial expert Nguyen Tri Hieu said it was necessary and urgentfor the Government to provide the support packages for businesses as many firmshad used bank loans but now, they had to scale down or even disrupt theirproduction and business due to the epidemic.
However, Hieu suggested, for businesses seriously hit by the epidemic, strongersupport measures should be taken.
He explained that though commercial banks pledged 285 trillion VND preferentialloans with interest rate cuts of some 0.5-1 per cent per year for firms, theinterest rate was still high when production and business performance has beenseriously affected.
“As the loans come from commercial banks, without any aid from the centralbank, I think the interest rate will remain high for struggling firms as banksstill have to pay high input costs and earn profits,” said Hieu.
Currently, the short-term lending rate at banks averages at 7-9 percent peryear, and 9-11 percent per year for medium- and long-term loans.
Nguyen Quoc Hung, director of the State Bank of Vietnam (SBV)’s CreditDepartment, also admitted he was not sure whether enterprises could absorb the 285trillion VND credit package as the businesses were facing both production andmarket difficulties.
It was difficult for banks to boost lending at this time as capital demandswere very low, Hung said, citing SBV’s data that credit growth of the entirebanking system in the first two months of this year slowed sharply, inching uponly 0.06 percent against the 1 per cent rate in the same period last year, dueto adverse impacts of the COVID-19 epidemic. Compared with the end of lastyear, credit even decreased by 0.18 percent.
“The Government should offer stronger support, such as cutting the policyinterest rate by some 0.5 percentage points to provide lower interest rate fundfor commercial banks, who then can lend to struggling firms at better interestrates,” Hieu suggested.
A lower interest rate was very important, especially under the current contextwhen businesses were shrinking production or even closing their doors, and hadno capital demands, he noted.
Central banks of many other countries have so far also taken strong measures,attempting to contain the coronavirus’ economic fallout, Hieu said, citing theFederal Reserve last week was the latest to slash its interest rates by half apercentage point, its biggest single cut and first emergency rate move in morethan a decade since the depths of the 2008 financial crisis, as a pre-emptivemove to protect the economy from the coronavirus.
Meanwhile, analysts from Fitch Solutions believed the Government’s fiscalsupport package would see a larger deficit this year versus the Government’sprior forecast.
“We are revising our forecast for Vietnam to record a fiscal deficit of 3.8 percentof GDP (excluding debt principal repayments) in 2020, versus 3.4 percentpreviously... Accounting for debt repayments, our 2020 deficit forecast isrevised to 7.4 percent of GDP, from 7.0 percent previously,” Fitch analystssaid.
In light of this fiscal package, Vietnam’s expenditures will be also expectedto grow by 8.1 percent, from 7.4 percent previously, over the first 2019 fullyear estimates, according to the analysts./.
VNA
