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Tuesday, July 8, 2025

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Hinging on fiscal policy

Aware of challenges in achieving the ambitious GDP growth target of 8% or higher this year, the Government has reaffirmed its commitment through Directive 05/CT-TTg, outlining key policy steps to drive economic expansion Issued on March 1, the directive identifies key short-term and long-term strategies to support growth. Long-term measures include private sector development, foreign direct investment (FDI) attraction, a 30% reduction in administrative procedures and business costs, and advancements in human resources, science, and technology. In the short term, fiscal and monetary policies, along with measures to stimulate consumption and export, will play a crucial role in meeting growth targets. However, these short-term strategies also come with limitations and risks. Fiscal policy remains the Government’s primary tool for short-term economic support. The directive extends tax exemptions, reductions, and deferrals, along with land rent waivers and school fee exemptions, while emphasizing the need to accelerate public investment. However, tax and fee reductions have been in place for several years, limiting further fiscal support. The value-added tax (VAT) cut from 10% to 8%, first introduced in 2022, has already been applied four times and extended until June 2025. Similarly, annual tax relief measures for businesses, implemented by the Ministry of Finance […]
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