TABLE OF CONTENT
I. Introduction

3

II. Definition of Monetary Policy and Fiscal Policy

3

1. Monetary Policy

3

2. Fiscal Policy

3

III. The influence of COVID-19 on Vietnamese economy

4

IV. The monetary and fiscal policies of the Vietnamese Government

5

1. The monetary and fiscal policies

5

1.1. The monetary policies

5

1.1.1. The monetary policies in early 2020

5

1.1.2. The monetary policies in the last 6 months of 2020

6

1.2. The fiscal policies

8

2. The impacts of these policies

9

2.1.

The monetary policy

9

2.2.

The fiscal policy

9


V. The difficulties and challenges in execution of these policies and measures to improve

10

1. The difficulties and challenges in execution of these policies

10

2. The measures to improve the difficulties

11

VI.

The monetary and fiscal policies of other Government

12

1. China

12

2. USA

12

VII. Conclusion

13


VIII. References

13

2


I. Introduction
The COVID-19 pandemic not only affected public health but also disrupted trade,
disrupted global production chains, as well as affected the economy of many countries and
corporations around the world. As a large open economy, Vietnam also immediately suffered
many bad changes caused by the COVID-19 epidemic. Thousands of businesses went bankrupt,
millions of workers lost their jobs due to narrowed operations of the companies, ... As the
epidemic progressed more complicatedly, the more difficulties that Vietnamese businesses
suffered. Faced with that serious situation, the Vietnamese government has come up with
policies to deal with unprecedented challenges and revive the economy. This report will
analyze the monetary and fiscal policies used by the Government of Viet Nam as well as its
purpose and impact on the post-pandemic economic recovery.
II. Definition of Monetary Policy and Fiscal Policy
1. Monetary Policy
Monetary Policy is a strategy used by the Central Bank to control and regulate the money

supply in an economy. It is also known as credit policy.
There are two types of monetary policies, expansionary and contractionary:
+ Expansionary Monetary Policy: The policy in which the money supply is increased along
with the minimization of interest rates.
+ Contractionary Monetary Policy: If there is a decrease in money supply and a rise in interest
rates.
The primary purposes of the monetary policy include bringing price stability, controlling

inflation, strengthening the banking system, economic growth, etc. The monetary policy
focuses on all the matters which have an influence on the composition of money, circulation of
credit, interest rate structure.
2. Fiscal Policy
Fiscal Policy is the tax revenue and expenditure policies to influence the overall demand
and supply for commodities and services in the nation’s economy. It is a strategy used by the
government to maintain the equilibrium between government receipts through various sources

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and spending over different projects. The instruments used in the Fiscal Policy are the level of
taxation & its composition and expenditure on various projects.
There are two types of fiscal policy, they are:
+ Expansionary Fiscal Policy: The policy in which the government minimizes taxes and
increase public spending.
+ Contractionary Fiscal Policy: The policy in which the government increases taxes and
reduce public expenditure.
The main objective of the fiscal policy is to bring stability, reduce unemployment and
the growth of the economy.
III. The influence of COVID-19 on Vietnamese economy
Like most other economies in the world, Vietnam is also affected by an outbreak of
disease. According to the General Statistics Office, GDP in the first 6 months of 2020 has had a
record low growth rate - only 1.81%, this is the lowest growth rate of our country in the last 30
years since 1991 and is the lowest growth rate of the 6 months of each year in the period 20112020. [1].
The following table shows the statistics of GDP growth in the first 6 months of the year
in 2018, 2019, and 2020:
2018

2019


2020

(%)

(%)

(%)

Gross domestic product (GDP) in the first 6 months of the year

7,08

6,76

1,81

Service industry

6,9

6,69

0,57

Industry and construction

9,07

8,93


2,98

Agriculture, forestry and fisheries

3,93

2,39

1,19

Processing and manufacturing industry

13,02 11,18

4,96

Market service industry – wholesale and retail

8,21

8,09

4,3

The market service industry – finance, banking and insurance

7,58

7,9


6,78

Year

…

…

…

…

According to VNDirect, the service - tourism industry will be most affected by Covid 19. In
2019, the number of international visitors to Vietnam is estimated at 18 million, up 16.2%
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compared to 2018. Total revenue from tourists in 2019 amounted to 726,000 billion VND. In
2020, according to the expected plan, Vietnam will welcome 20.5 million international tourists,
serve 90 million domestic tourists, total revenue from tourists will reach more than 830,000
billion VND. However, due to the impact of the COVID-19 epidemic, it is estimated that the
number of guests staying in hotels has decreased by 60-80%; tourism industry lost 7 billion
USD. A survey by the Private Economic Development Research Board showed that, if Covid19 lasted 6 months, 74% of businesses would say they would go bankrupt.
The economic losses impacted by COVID-19 will multiply in the context of China's
supply chains being cut off by the epidemic. Our country's manufacturing, processing and
manufacturing industries are heavily dependent on the supply of raw materials and input
components imported from China. Therefore, when the supply chain was broken, most
businesses immediately fell into the situation of running out of raw materials for production. In
which, the industry most affected is electricity - electronics. According to reports from the

Ministry of Industry and Trade, electronic businesses only have enough spare parts for
production until the middle or the end of March. [2]
Similar to the aviation industry, the Civil Aviation Administration estimated that
Vietnam's aviation could lose 25,000 billion VND (more than 1 billion USD). According to the
representative of Vietjet Aviation Joint Stock Company, many response solutions are proposed
such as restructuring flights, opening new routes to India ..., but the plan is also temporarily
suspended because the epidemic spreads. In the short term, Vietjet must reduce working hours
and increase online activities.
In addition, the second quarter of this year also saw the highest unemployment rate in
the past 10 years, at 2.73%. According to the General Statistics Office, as of the end of June
2020, up to 30.8 million people aged 15 and over are negatively affected by the Covid-19
epidemic, including job loss and reduced working hours. , reduce income… [3]
IV. The monetary and fiscal policies of the Vietnamese Government
1. The monetary and fiscal policies
1.1. The monetary policies
1.1.1. The monetary policies in early 2020
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❖ Adjustment of interest rates
The Prime Minister issued Instruction No.11/CT-TTg on March 4, 2020, implementing
urgent tasks and solutions to remove difficulties for production and business, ensure social
security to cope with COVID-19. In order to match the developments of the macro-economy,
international financial markets and to remove difficulties for production and to remove
difficulties for production and business, the State Bank of Vietnam decided to adjust the interest
rates in Decision No. 418 / QD. -NHNN, Decision No. 419 / QD-NHNN, Decision No. 420 /
QD-NHNN, Decision No. 421 / QD-NHNN, Decision No. 422 / QD-NHNN, and Decision No.
423 / QD-NHNN. [5]
On August 16, 2020, the State Bank announced its decision to further reduce some of
the operating rates with a decrease of 0.2-0.5% per year. Most notably, the State Bank has

lowered the interest rate on compulsory reserve deposits at the Bank to 0.5% per year.
❖

Maintaining stability and expanding credit capital sources:

On March 31, 2020, The Central Bank issued Instruction No.02/CT-NHNN on urgent
solutions of the banking sector to strengthen prevention, combat, and overcome difficulties
caused by the COVID-19 epidemic. Organizations at the Central State Bank will provide
refinancing loans to credit institutions (CIs) to implement programs under the direction of the
Government.
Next, the Central State Bank will directly work with the Chairman of the Member’s
Council/ Board of Directors/ General Directors of CIs to promote effective implementation of
solutions to remove difficulties for customers who were affected by epidemics such as
restricting the repayment term, exempting or reducing interest on old loans, keeping the debt
group in accordance with Circular 01/2020/TT-NHNN and giving new loans with preferential
interest rates.
1.1.2. The monetary policies in the last 6 months of 2020.
The organizations continued to drastically and effectively implement the assigned tasks
and solutions in Instruction No.01/CT-NHNN (3/2/2020), Instruction No.02/CT-NHNN
(31/3/2020), and the epidemic prevention and control measures mentioned in the official
telegram No. 02, 03, 04 on COVID-19 prevention of the State Bank.
6


In August 2020, the State Bank of Vietnam has just issued document No.5596/NHNNVP pointing a number of important tasks that the entire industry must perform in the last 6
months of 2020, including:
+ The administration of monetary and credit policy must follow economic developments
at home and abroad to forecast, assess the situation and promptly advise and propose solutions
to monetary and credit policy management. appropriately, ensuring market liquidity, controlling
inflation, supporting stability, and facilitating the faster reduction of interest rates.

+ Monitoring world and domestic gold prices to promptly inform and recommend the
people, stabilize market sentiment, not to affect macro stability.
+ Regarding the promotion of payment activities, it is necessary to thoroughly study and
complete a draft Decree replacing Decree No. 101/2012 / ND-CP on non-cash payments,
ensuring feasibility and compliance. in line with the development orientations of payment
activities in the coming time and improve the management efficiency of the State Bank for
payment services.
+ Regularly inspect and supervise the implementation of Circular 01/2020 / TT-NHNN
correctly and effectively. Proactively balance between capital sources and capital used to
ensure liquidity.
The strict control of credit in potentially risky sectors, especially investment credit, real
estate, securities, BOT, credit institutions to contribute capital, purchase shares, and invest in
bonds enterprise,…
Strictly complying with the instructions of the Government, the Prime Minister and the
State Bank on reducing operating costs, salary, bonus, and profit in order to continue lowering
the actual lending interest rate for existing loans and new loans, support and accompany
businesses and people to overcome difficulties, contribute to the recovery of business after the
epidemic.
In terms of restructuring associated with bad debt handling and operational safety,
continuing to effectively implement the approved restructuring plan associated with bad debt
handling by 2020, focusing on handling bad debts. , collateral of bad debts, and concentrating

7


financial resources for bad debt handling; Minimize bad debt deflation. Continue to healthy
finance, increase charter capital.
1.2.

The fiscal policies


In the first 6 months of the year, the Ministry of Finance submitted to the Government
and the National Assembly for approval 3 resolutions; submitted to the Standing Committee of
the National Assembly for consideration 4 resolutions, of which 2 have been adopted;
submitted to the Government for promulgation 12 decrees, submitted to the Prime Minister for
promulgation 2 decisions; at the same time, issued according to its competence 63 circulars.
Among these, there are many regulations related to the group of financial solutions to remove
difficulties for people and businesses affected by the COVID-19 epidemic.
Among them, it is necessary to mention Decree No.41/2020/ND-CP on the extension of
the time limit for VAT payment, corporate income tax, personal income tax, and land rental for
business and household business. [6] As of July 30, the tax agency had received more than
179.000 requests for tax and land rental extension, with an amount of VND 54.6 trillion.
The Ministry of Finance has submitted to competent authorities to decide on the
exemption or reduction of a number of taxes, fees, and charges with an estimated value of
about 20 trillion VND.
In particular, a series of fees and charges have been deeply cut by the Ministry of
Finance, facilitating and reducing costs for people and business, such as:
+ 70% reduction in the fee for business registration.
+ 67% discount on the fee for issuing the operation license of credit institutions.
+ 50% discount on the fee for issuing the operation license of credit institutions.
+ 50% reduction of 20/22 fees and charges in the securities sector.
Minister of Finance Dinh Tien Dung affirmed that financial policies always focus on
promoting solving difficulties for businesses and people. Along with the reform of administrative
procedures, strengthening revenue management, strict assurance, avoiding the profiteering of
policies to fraud, tax evasion,… are the most fundamental solutions implemented by the Ministry
of Finance in the short term and long term to contribute to economic recovery.

8



The Finance sector continues to promote administrative reform and administrative
procedures to prepare for new investment flows. At the ninth session of the National Assembly,
Minister Dinh Tien Dung said that we must prepare for selective investment flows, so it is
extremely important to improve the investment environment; therefore, the Finance sector
continues to promote modernization reform, administrative procedure reform, facilitating
investment and business.
However, before the second wave of the COVID-19 epidemic, Minister Dinh Tien Dung
said that the Ministry of Finance continued to review fiscal policies to ensure better service for
the recovery of the economy; for the restart of businesses, especially in a particular context in
Vietnam, there are more than 93% of small and micro-enterprises.
The Minister said that these businesses are greatly affected, so we review to ensure
reducing obligations for people and businesses, promoting production and business activities.
2. The impacts of these policies.
2.1. The monetary policy
The central bank’s lowering of interest rates does not seem to have much effect of boosting
credit growth in the current context, which is believed to mainly affect the income of banks,
commercial goods, and reduce the cost burden on the state budget. Currently, the interest rate level
is at the lowest level in 10 years, but credit growth is still sluggish. The main cause of slow credit
growth is the weak demand for credit in the economy when production and business activities are
delayed due to the pandemic. While a pandemic also increases the level of risk.

Bao Viet Securities Company believes that the State Bank’s decision to cut interest rates
is mainly oriented and psychological, and whether Vietnam really loosens monetary policy or
not, must wait for real data on credit growth.
An expert said that the reduction of the above interest rates is professional between the
State Bank and commercial banks, has not had a direct impact on the corporate lending market.
However, the interest rate cut also increases the exchange rate between the VND and the
Chinese yuan, avoiding negative effects on Vietnam’s exports and competitiveness with an
important trading partner, China.
2.2.


The fiscal policy
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The Government issued Decree No.41/2020/NĐ-CP on the extension of the time limit
for VAT payment, personal income tax, and land rental for enterprises and business households,
initially promoting well. As of July 30, the tax agency had received more than 179.000 requests
for tax and land rental extension, with an amount of 54.6 trillion VND.
With the social security support package of 62.000 billion VND, according to the
Ministry of Labor-Invalids and Social Affairs, localities have so far approved for 15.8 million
subjects with the amount of about 20.000 billion. In which, about 400 billion VND to support
businesses and people to relax payment of social insurance and 2.500 billion VND to pay
unemployment insurance.
With business, if the fiscal burden is pushed up too much, it can cause macroeconomic
instability in the long term and lead to consequences of the economy. At the same time, interest
expenses will also be a burden for businesses when there is no revenue.
V. The difficulties and challenges in execution of these policies and measures to improve.
1. The difficulties and challenges in execution of these policies.
At the regular meeting of the Government in July 2020, held on August 3, Prime
Minister Nguyen Xuan Phuc pointed out 3 external risks and challenges. The biggest risk is
still the unpredictable development of COVID 19, especially important partners were severely
affected. Secondly is the escalating trade and technology tensions between many countries.
Thirdly is complex geopolitics, natural disasters, and floods affect economic resilience.
The Prime Minister emphasized that the challenge facing Vietnam is a resurgence of the
epidemic, threatening economic recovery. Inflation has been controlled and is decreasing but
there are many challenges.
Budget spending continues to increase, making the budget deficit 2020 forecast to
increase. However, Prime Minister said that, including the budget deficit, fiscal policy should
continue to support monetary policy, support for employees and businesses. The Government’s

support package, especially the social security package, has been solved step by step, but it
needs to be implemented more quickly, won and expanded, and more effectively. Along with
that is improving the business investment environment.

10


Regarding public investment, if fully disbursed 63 billion VND, it will contribute to
GDP growth by 0/4% not including creating a premise to promote private investment and
foreign investment. And creat jobs. Therefore, the Prime Minister requested to disburse 100%
of the public investment capital, including ODA capital, with strong measures.
2. The measures to improve the difficulties.
After clearly identifying the major difficulties and challenges facing Vietnam, Prime
Minister Nguyen Xuan Phuc stated that policies must be synchronous and effective. Especially
the fiscal and monetary policy to strongly stimulate aggregate demand, with attention to the
large enough size and scope, appropriate to immediately create growth drives and ensure the
goals and orientation.
The implementation of the 62.000 billion VND support package recently needs to learn
from the experience for more convenience. The Prime Minister assigned the Minister of
Planning and Investment to assume the prime responsibility for sum up and report to the Prime
Minister before August 15 to report to the Government before submitting to the Politburo for
comments and reporting to the National Standing Committee related issues.
Regarding public investment capital, including ODA capital, with strong measures.
Stricly handle organizations, agencies, units, and individuals that slow down and wrong
regulations, consider disbursement of public investment capital as a key political task, as a
basis for staff evaluation in 2020.
The Ministry of Finance, the Ministry of Industry and Trade, relevant ministries and
agencies have better managed the market, price, anti-smuggling, trade fraud, and appropriately
protected domestic production and consumption. Administrative reform, improved business
investment environment is an important task to facilitate and less costly. The business

environment must be more open to attracting investment flows to move into Vietnam.
The Prime Minister suggested ministries, branches and localities must have special working
groups headed by ministers, heads of branches, and Chairman of the provincial People’s
Committee so that they together with the Prime Minister’s Special Working Group focus on solving
problems, attracting foreign investment capital, especially from multinational companies that are
moving in the region and globally. President of provinces, cities, minister, and heads of
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branches must directly address them, directing to resolve the recommendations of the people
and enterprises. Speed up the development of the digital economy, e-government, and epayment, e-transactions, while increasing labor productivity, keeping up with trends, and
reducing the risk of epidemic spread due to direct interaction.
VI. The monetary and fiscal policies of other Government
1. China
The Central Bank of China does not use the tools of special monetary policy such as
applying zero or negative interest rates, as well as quantitative easing. They use a combination
of both overall and strctural policy measures, maintain ample liquidity, and promote interest
rate reform to cut borrowing costs and supplement financial resources more effectively.
According to Director of the Central Bank’s Monetary Policy Department – Mr. Ton
Quoc Phong, the epidemic has caused factors of instability to increase, and the impact on the
psychology of the money market is inevitable. Therefore, the monetary policy needs to be more
stable to deal with volatile factors [6]. The three stabilization factors include:
+ The direction of prudent monetary policy has not changed.
+ Maintain flexibility and moderation of operations.
+ Persistent, determined to implement the normal monetary policy.
2. USA
Since March 3, 2020, the Federal Reserve (FED) has urgently lowered interest rates by
0.5%, this is the strongest reduction since the end of 2018.
From March 26, 2020, FED applies a quantitative easing program (QE) through the
purchase of government bonds and asset-backed securities. Lower discount rate on loans from

1.5% to 0.25% and lower required reserve ratio to 0%. [5]
In addition, the US Congress has coordinated with the White House to offer support
packages to reduce damage and stimulate the economy.
In general, the monetary and fiscal policies introduced by the US government are
similar to those of Vietnam.

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VII. Conclusion
The monetary and fiscal policies of the Vietnamese Government have initially achieved
good results in stabilizing and restoring the economy in the COVID-19 epidemic. However,
understanding and assessing the impact of each policy tool will be the basis for making
policies with specific orientation to the pandemic.
Vietnam needs to focus on adjusting its economic structure towards a strong development in
the area less affected by the pandemic. To expand production zones, industrial parks, and
economic zones in order to develop agricultural mode processing, the supply of applied data,
and develop professional auxiliary. Governments should focus on areas with high demand
during an epidemic, such as the digital economy, online guest rooms, and public health checks,
television, and online education.
VIII. References
1. Tổng cục Thống kê (Junly, 2020). Tình hình kinh tế - xã hội 6 tháng đầu năm 2020.
Retrieved from: />2. Nhân dân Điện tử (March, 2020). Doanh nghiệp chung tay đối phó dịch COVID-10.
Retrieved from: />3. Dân sinh (April, 2020). COVID 19, ảnh hưởng nặng nề đến nhóm lao động phi
chính thức. Retrieved from: />4. Tin tức pháp luật (March, 2020). Thông báo điều chỉnh lãi suất điều hành của Ngân
hàng Nhà nước Việt Nam. Retrieved from: />5. Vnexpress (April, 2020). FED công bố chiến lược chính sách tiền tệ mới.
Retrieved from: />%E1%BB%91-chi%E1%BA%BFn-l%C6%B0%E1%BB%A3c-ch%C3%ADnh-s
%C3%A1ch-ti%E1%BB%81n-t%E1%BB%87-m%E1%BB%9Bi/ar-BB18rMoy

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6. VOV (April, 2020). Trung Quốc khẳng định áp dụng chính sách tiền tệ thận trọng, linh
hoạt. Retrieved from: />
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