STATE BUDGET ESTIMATE OF 2023 seminar – GDP growth in 2023 will be lower than this year, but there is one indicator that will definitely be higher is inflation.

In its efforts to reform the economy and society, Vietnam has set many goals to improve the efficiency of budget use and transparency. This afternoon on November 10, the Center for Development and Integration (CDI) – a member of the Budget Transparency Alliance (BTAP), chaired by the Vietnam Center for Economic and Strategic Studies (VESS), organized the Seminar “State Budget Estimate in 2023 – Prospects and Challenges”. Together with more than 50 representatives from government agencies, research organizations, social organizations, and media agencies, they discussed and contributed independent opinions on the State Budget Estimate 2023. Mr. Vu Sy Cuong said: “GDP growth in 2023 will be lower than this year, but there is one indicator that will be higher, which is the inflation index.”

With a more complicated world context compared to the time when the State budget estimate was made in 2022, Vietnam’s economy suffered from high prices, the fluctuations of gasoline and raw materials, epidemics, storms, and floods have caused much damage to production, business, and people’s life. In addition, the Russia-Ukraine conflict continues; the general adjustment of monetary and fiscal policies in the world and the US and EU countries to control inflation has affected the financial market along with global trade and investment activities. Mr. Nguyen Minh Tan said: “In 2023, besides the foundation of recovery from the previous year, the Vietnamese economy will continue to face challenges within the economy, including competition and low market resilience”. 

SOME POSITIVE POINTS OF THE STATE BUDGET ESTIMATE AND CENTRAL BUDGET DISTRIBUTION IN 2023

First, the draft assesses and explains the basic orientation on changes in state budget expenditures. It has explanations of changes in main revenues and expenditures. The draft also has an assessment and comparison to the implementation estimate for 2022 in terms of revenue and expenditure to balance the state budget.

Second, regarding estimating state budget balance expenditure, the draft tends to change the spending structure more appropriately (reducing the proportion of recurrent expenditure). Development investment expenditures accounted for 35% of total state budget expenditures, up 2.4 percentage points and 38.1% in value compared to the 2022 estimate; recurrent expenditures accounted for 56.5% of total state budget expenditures, up 5.4% compared to the 2022 estimate.

Mr. Nguyen Minh Tan commented: “One of the goals of the State Budget 2023 is to ensure the source for salary reform and social insurance policy.”

SOME NOTABLE INFORMATION

 

1. The draft state budget 2023 needs more detailed information on investment expenditures; there needs to be a list of investment expenditure estimates of the central budget. Disbursement of public investment is often delayed, affecting economic growth and the operation of the business system. Therefore, there is a need for more detailed discussions on public investment spending in the State Budget Estimate 2023, both at the central and overall local levels.

 

2. The draft state budget estimate 2023 needs more information to assess whether state budget expenditure is enough to ensure 20% for education, 2% for science and technology, and 1% for the environment, as current regulations require.

 

3. Issues about the state budget revenue estimate in 2023 and the fiscal year 2023-2025 plan

• The revenue growth forecast is too cautious in the current macro context (only 3.25% higher than the 2022 estimate, while the inflation in 2022 and 2023 is expected to be higher than 5%). Total state budget revenue in 2023-2025 only increased by 10.3% compared to the state budget revenue in the three years of 2020-2022. The mobilization rate into the state budget is expected to be about 15.7% of GDP; this rate is much lower than the average in the 2016-2021 period (average of 24.6% in old GDP and 18.5% in adjusted GDP). The decrease in the ratio of budget revenue to total GDP can be a good sign for reducing the tax burden for people and businesses; however, if the budget expenditure is still high, the budget balance will face difficulties. 
• The report has not mentioned the contingency plans in case the state budget revenue has fluctuated dramatically.
• There are no different scenarios for the 3-year or medium-term state budget financial plan.

 

Mr. Vu Sy Cuong pointed out: “Disbursing public investment is still a challenge in 2023, so why does the estimate of development investment expenditure continue to increase? This is a difficult problem”; “Investment spending in the estimate is not specific, and I, as a citizen, will not know what my money is used for.”

4. The structure of state budget expenditure has changed greatly with a sharp increase in investment spending (estimated state budget investment spending accounts for 35% of the total state budget balance expenditure in 2023, an increase of 2.4 percentage points, an increase of 38% in absolute terms compared with that of 2022) but the solution for disbursement is unspecified. If disbursement continues to be as poor as in recent years, it will affect economic growth, capital liquidity, and money markets.

5. The accuracy of the state budget estimate is still low (the difference between the state budget estimate approved by the National Assembly and the subsequent state budget settlement is still large).

6. Consult the relevant parties on the draft state budget estimate.

 

Mr. Bui Dang Dung commented: “For the past 15 years, I have been monitoring state budget revenue estimates. This number has increased every year. Why don’t we build a more feasible estimate?”

The draft state budget estimate for 2023 was published by the provisions of the 2015 State Budget Law on the website of the Ministry of Finance on October 25, 2022. The Ministry of Finance can organize seminars and press conferences to introduce the draft annual state budget estimate, creating more opportunities for organizations and people to comment on the draft. This draft contributes to implementing recommendations from the National Open Budget Survey (OBS) results.

 

CDI Vietnam.

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