The pros and cons of a stimulus package to tackle Covid-19 impact

08:50 | 06/04/2020 Society

(VEN) - Many economists are suggesting an economic stimulus package to support businesses against the adverse impacts of the Covid-19 pandemic. However, others are suggesting a more cautious approach.

the pros and cons of a stimulus package to tackle covid 19 impact

Business hardships

Many businesses have thought of halting production in view of the consequences of the pandemic. For instance, domestic textile and garment companies will run out of production materials and therefore may have to close this month. The export value of the Vietnamese textile and garment sector in January 2020 decreased nearly 23.5 percent compared with January 2019.

Businesses in other sectors which depend heavily on the Chinese market, such as agriculture and electronics, also face a similar dilemma and are seeking ways to stabilize production and promote sales. Such business hardships once again expose the inherent limitation of sectors that depend heavily on specific markets. Many economists believe it’s time to think of a government stimulus package for the economy to protect businesses against the adverse impacts of the pandemic.

the pros and cons of a stimulus package to tackle covid 19 impact

Robust finances

However, Do Thien Anh Tuan from the Fulbright School of Public Policy and Management, said there’s insufficient basis to launch an economic stimulus package for the time being because in fact, businesses do not lack money. Rather, he explained, the epidemic has led to imbalance between supply and demand. Moreover, Vietnam’s monetary and fiscal situation is still robust, he added, pointing out that the 14 percent credit growth target set for this year remains almost unused, and the banking system does not lack money to lend.

According to Do Thien Anh Tuan, an economic stimulus package could be a long-term solution. In the short term, in his opinion, the Ministry of Finance should urgently implement specific support measures for businesses affected by the pandemic, for example offering tax exemptions/reductions or extending tax payment deadlines. The government can also increase purchases for stockpiling to support sectors and fields affected by the pandemic.

Vu Tien Loc, Chair of the Vietnam Chamber of Commerce and Industry (VCCI), recently proposed to the government specific recommendations to protect the economy and the business community against the adverse impacts of the Covid-19 pandemic. Specifically, he requested the State Bank of Vietnam to consider reducing the base interest rate. Commercial banks are encouraged to offer moratoriums, extend tax payment deadlines, reduce lending interest rates, raise credit limits and restructure loans for businesses in fields heavily affected by Covid-19. The head of the VCCI also requested the state not to increase prices of services and production materials in areas under its management, and not to impose charges on granting certificates of origin (C/O) to import, export businesses.

The Ministry of Industry and Trade recently asked the Ministry of Transport to coordinate with the Ministry of Finance to check taxes and fees and reduce transportation charges such as tolls, parking fees, aviation fuel taxes and port service charges.

The Ministry of Industry and Trade also proposed that border provinces in the north create favorable conditions for circulation of agricultural products as well as the transportation and delivery of other goods to border areas.

The Ministry of Industry and Trade requested the Ministry of Transport to provide guidance on measures to prevent the spread of the Covid-19 pandemic on land, railway border crossings and seaports in ways that facilitate business operations.

Hai Linh