During March 17-18, 2021, a delegation of the State Bank of Vietnam (SBV) attended the virtual APEC First Finance and Central Bank Deputies' Meeting (FCBDM) of 2021, which was hosted by New Zealand. Also attending the Meeting there were leaders and representatives of the financial authorities and central banks of the 21 member economies in the region, as well as senior leaders of the international financial institutions such as the International Monetary Fund (IMF), the World Bank Group (WBG), the Asian Development Bank (ADB) and the Organization for Economic Cooperation and Development (OECD).
This was the first meeting in a series of events within the framework of the APEC 2021 Finance Ministers' Process (FMP), followed by the APEC Senior Finance Officials' Meeting (SFOM), which is scheduled in June 2021, in order to continue the discussions and conduct a mid-term review of the implementation progress of the cooperation activities during the year, and to prepare for the APEC Finance Ministers’ Meeting (FMM) scheduled in October 2021.
Under the theme of “Join, Work, Grow. Together”, New Zealand continues to lead the FMP process to develop an action plan to implement the APEC Putrajaya Vision 2040, towards building an "open, dynamic, resilient and peaceful Asia-Pacific community by 2040, for the prosperity of all our people and future generations". Accordingly, New Zealand has proposed two policy priorities for discussion in 2021, namely: (i) Economic Outlook and Policy Responses to COVID-19; and (ii) Current and Future Fiscal and Budget Policy and Frameworks. These priorities have received broad consensus among member economies in the region.
During the first session on the macroeconomic situation and the pandemic responses of different economies in the region recently, both international organizations as well as member economies acknowledged some positive changes in the economic activities and growth prospects. The IMF has adjusted its forecast for the growth of the APEC region in 2021 and 2022 to 5.7% and 4.1% respectively. However, the economic growths are expected to be uneven among economies and regions, and there will still be many uncertainties lingering from the consequences of the COVID-19 pandemic, with the main risks coming from the emergence of many new COVID strains and delays in the vaccination against the pandemic.
Delegates attending the virtual meeting
In that context, the participants in the Meeting emphasized the importance of continuing to: (i) introduce stimulus packages to support the vulnerable people and to accelerate the economic recovery; however, it is also necessary to monitor closely the increases of public debts and budget deficits due to large-scale stimulus packages, as well as possible credit quality declines due to loosened lending policies, and to focus on sustainable growth for the environment and climate change response; (ii) accelerate the structural reforms towards building a sustainable, resilient and inclusive economy; (iii) allocate resources appropriately in order to increase productivity and competitiveness; (iv) capitalize on the achievements of technology and digital transformation to address the challenges posed by the pandemic, and strengthen the connectivity in the region; and (v) enhance cooperation and sharing of experiences and knowledge among member economies.
In the second session on the future of fiscal policy and budget framework, the discussions focused on the implementation of the support packages and the impacts on the public debt sustainability in the medium-term. It is estimated that nearly 14,000 billion USD has been spent through fiscal stimulus packages to support the fight against the pandemic, and the global public debt ratio in 2020 went up to nearly 98% of the GDP as compared to 84% in 2019. In addition, it is expected that in 2021 many economies will gradually withdraw their stimulus packages and may reduce their budget deficits. Nonetheless, in the short-term, sustaining the fiscal stimulus packages is essential to boost consumer demand, bolster corporate confidence and investment, and create jobs. In the medium-term, cautious fiscal frameworks are needed to balance the need for short-term support for the vulnerable groups and fiscal sustainability.
During its presentation at the Meeting, Vietnam’s delegation shared some experience from its successful containment of the COVID-19 pandemic and the policy measures conducted by Vietnam in response to the pandemic, such as: (i) temporary support to vulnerable businesses and households through 3 decisions on tax deferrals; (ii) the acceleration of the disbursement of public investments has also positively supported the economic growth; (iii) loosening the monetary policy to maintain liquidity in the banking system, and restructuring the repayment terms, waiving or reducing the bank charges and interest, keeping the same debt groups for customers affected by the COVID-19 pandemic. These policies have effectively helped the GDP growth of Vietnam in 2020 to reach 2.91%, which is among the highest growing economies in the world.
In addition, Vietnam's delegation also shared about the program on digital transformation of the economy which has been approved by the Government of Vietnam, with one focus being the acceleration of the digitization in the financial sector, towards establishing a digital ecosystem for the finance sector. Vietnam hopes to promote further integration of this content into the FMP process through cooperation and experience sharing forums with member economies in the region.
VA