Recognizing a somewhat more positive trend in the economy in January, Dr. Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, noted that one of the clear indicators that the economy is still struggling is the market's purchasing power, which remains weak both domestically and internationally, even during the month before the 2024 Lunar New Year, when domestic demand typically experiences a strong increase according to established patterns.
"Consumer Price Index (CPI) in January rose by merely 0.31 percent compared to the previous month, easing inflation concerns. However, looking from another angle, the market's purchasing power remains low," assessed Dr. Nguyen Dinh Cung. This assessment is corroborated by data from the General Statistics Office of Vietnam, which confirms that total retail sales of goods and consumer service revenue in January amounted to an estimated VND524.1 trillion, marking a 1.6 percent increase from the previous month and an 8.1 percent rise from the same period in 2023. This growth, however, is lower than the pre-Tet periods from 2020 to now. Despite the generally optimistic nature of Vietnamese consumers, cautious psychology in spending is noticeably impacting the market.
According to a study released by UOB Vietnam at the end of 2023, eight out of every ten consumers in Vietnam expressed concerns about financial matters. Meanwhile, in January, HSBC predicted that external demand has yet to make a strong recovery. There are several factors supporting this forecast, including weak purchasing power and logistical challenges stemming from conflicts in Russia-Ukraine, Israel-Hamas, and particularly the recent conflict in the Red Sea.
With a shared perspective, both the World Bank (WB) and the Asian Development Bank (ADB) recommend that Vietnam continue implementing policies to stimulate economic recovery, such as boosting consumption and investment. At the final session of the year in 2023, the National Assembly approved the continuation of value-added tax reduction and allowed for the extension of the implementation of the development investment package under the Socio-economic Recovery and Development Program into 2024. These are indeed very appropriate measures.
Moreover, given the ongoing difficulties faced by businesses (with a record-high number of companies exiting the market), there is a pressing need for supplementary measures to assist enterprises in accessing new markets, ramping up exports, and driving domestic consumption.
For businesses, it's essential to proactively monitor economic trends and policy changes in major markets like the US, the EU, China, and Japan to adjust their production and marketing strategies accordingly. They should also capitalize on commitments made in both bilateral and multilateral free trade agreements. In the domestic market, this is a critical time for enterprises to innovate, finding ways to cut production costs and develop more practical products and services. Additionally, they should implement savvy promotional strategies to boost demand. Rather than being discouraged by challenges, businesses should strive to turn them into opportunities.
