HCMC economy facing hardships

Ho Chi Minh City’s economy has failed to fully recover from the pandemic and faced a slew of newer challenges, Prime Minister Pham Minh Chinh said.

HCMC economy facing hardships
Prime Minister Pham Minh Chinh speaks at a working session with the Ho Chi Minh City Party Committee on April 16, 2023. Photo by VGP

“HCMC is the economic locomotive of the country both in terms of tangibles such as GRDP and budget revenue, and in terms of invisibles because the city has a great influence… If it is in difficulty, the whole country will be also in difficulty,” he said when working with the municipal authorities Sunday.

The city’s GRDP was estimated at VND360.622 trillion ($15.28 billion) in the first quarter of this year, up 0.7% over the same period last year.

This growth ranked the 8th from bottom in all 63 localities, and was its lowest level in the last 8 years, excluding the Covid period. It was also the lowest among the 5 biggest cities.

In the first quarter, the disbursement rate of public investment of HCMC was only 4%.

The prime minister said the Government was working closely with HCMC authorities to help the city overcome consequences of the pandemic. “The consequences cannot be dealt with overnight.”

According to the prime minister, the world situation is affecting Vietnam. Inflation in many countries around the world has caused the market to shrink.

The U.S. Federal Reserve’s increasing interest rates has caused the value of the U.S. dollar to rise, leading to the depreciation of the Vietnamese currency. The problem for Vietnam is how to handle the exchange rate and interest rates.

While China’s reopening after Covid has created favorable conditions for Vietnam, it has also posed challenges for Vietnam regarding competition for markets and supply chains.

Chairman of the HCMC People’s Committee Phan Van Mai said the city’s economic growth rate has fallen due to many reasons.

The real estate and financial markets have faced many difficulties, with bank bad debt and bond maturity pressure tending to increase.

The labor cut has lasted from the end of 2022 due to shortages of production orders and capital, while consumer demand has dropped.

“The growth momentum, which has been declining for many years, eroded even further after the pandemic. Besides, old problems have not been completely resolved, while new development space has not been built and promoted,” Mai said.

Mai proposed the Government establish a working group with HCMC to study economic restructuring and determine the driving force and breakthrough mechanism for the city to develop further.

He also proposed the Government assist key traffic projects such as HCMC – Moc Bai and Ben Luc – Long Thanh expressways, and ring roads.

The city has set an economic growth target of 7.5-8% for 2023.

However, the Ho Chi Minh City Institute for Development Studies predicted the city’s economy will continue to face many challenges in the second quarter of this year when the real estate, finance and labor markets keep on meeting with difficulties.

The growth target of 8% is not feasible, it said. The city has not adjusted the growth target, but focused on striving for full-year growth of 7.5%.