Prioritize stimulating domestic consumption

In the first six months of 2024, service activities continued to maintain good growth, with some service industries such as transportation, warehousing, accommodation and catering growing better than the pre-Covid-19 period due to support from increased travel demand during the peak summer tourist months.

Foreign tourists visit and shop at Bat Trang pottery village, Gia Lam district ( Hanoi ). (Photo: TUE NGHI)

According to the General Statistics Office, in the first six months of the year, the service sector achieved a growth rate of 6.64%, contributing 3.28 percentage points to the overall growth rate of 6.42% of the economy .

Need a synchronous solution

Notably, total retail sales of goods and consumer services revenue increased by 8.6% over the same period (up 5.7% after excluding price factors), in which the main contribution was thanks to revenue from accommodation, food and beverage and travel activities when attracting a sharp increase in international visitors.

In the first six months of the year, the total number of international visitors to Vietnam increased by 58.4% over the same period; domestic tourists also had good growth; the number of Vietnamese people leaving the country increased by 11.4%; final consumption had a fairly good growth rate, especially household consumption increased by 6.17%, showing that consumers have a need to spend more on sightseeing, tourism and relaxation activities.

Basic spending and spending on personal hobbies are also more open after a long period of pressure from the Covid-19 pandemic, leading to changes in consumer behavior and habits.

However, domestic consumer demand has not recovered as strongly as expected. According to the General Statistics Office, total retail sales of goods and consumer service revenue in the first six months of the year increased by 2.7 percentage points lower than the same period last year, which is also a lower increase than the same period in previous years before the pandemic.

The survey results on the production and business situation of enterprises, the trade and service sectors in the second quarter of 2024 also showed that 56.4% of enterprises assessed that domestic market demand was low. Industries with low growth compared to the same period and lower than expected growth were finance, banking, insurance; arts, entertainment; and other service activities.

To increase purchasing power during the peak summer season, the aviation and tourism industries have cooperated to implement tourism stimulus programs, including organizing night flights with more economical airfares. However, domestic tourists are not interested in this program due to some unreasonable points.

Mr. Hoang Nhan Chinh, Head of the Tourism Advisory Board (TAB) Secretariat, said that the reason is that hotel check-in times and night flight schedules of airlines are out of sync. Hotels have a check-in policy of 2 p.m., check-out at 11 a.m., and guests who check in early or check out late must pay extra fees.

Meanwhile, the night flight time frame applies from 9pm to before 5am the next morning, not to mention other unfavorable factors such as transportation to both ends of the airport, dining places for night flight passengers..., all of which incur additional costs. Therefore, it is necessary to have the cooperation of related service providers to have suitable itineraries for tourists, taking advantage of low ticket prices during night flight time, only then can we strongly stimulate the demand of domestic tourists.

Continued increase in aggregate consumer demand

In the context of many difficulties in the world economy, slowing export growth, and many businesses facing a shortage of orders, economic experts recommend that prioritizing domestic consumption stimulation should be considered an important solution to promote economic growth in 2024, in order to achieve the set target.

Therefore, the Government and ministries, branches and localities need to synchronously implement solutions such as reducing consumer goods prices; adjusting salaries; reducing personal income tax and corporate income tax; increasing consumer loans; at the same time implementing debt deferral and debt forgiveness and increasing social security support, especially direct subsidies for the poor, expanding unemployment insurance, reducing tuition and hospital fees.

Ms. Nguyen Thi Mai Hanh, Director of the National Accounts System (General Statistics Office), said that with the advantage of a population of more than 100 million people, domestic consumption is still an important factor driving economic growth. The continued extension of the 2% reduction in value-added tax (VAT) until the end of 2024 and the policy of increasing the basic salary from July 1 could bring positive effects. According to the Ministry of Finance's estimates, the VAT reduction will reduce the budget revenue in 2024 by about VND47 trillion.

Although tax reduction causes the budget to lose revenue in the short term, it has the effect of nurturing revenue sources because the policy of directly reducing taxes on shopping bills will stimulate people to consume goods and services for daily life, thereby contributing to the recovery and growth of production and business activities of enterprises.

"Reality shows that the recent VAT reduction policy has had practical effects, with multi-dimensional impacts on the economy as commodity prices have decreased, consumption has increased, helping businesses increase production, restore orders, and reduce input costs. If inventories remain, prices will increase, inflationary pressure will not be able to stimulate consumer demand, leading to difficulties in many domestic production and business sectors," analyzed Dr. Nguyen Quoc Viet, Deputy Director of the Institute for Economic Research and Policy.

According to Dr. Nguyen Bich Lam, former General Director of the General Statistics Office, domestic final consumption demand accounts for more than 70% of the economy's GDP. To promote production, create jobs, and create a foundation for increasing domestic consumption demand in the coming time, the Government needs to implement solutions to stimulate consumption through tax and social security policies; reduce prices of aviation and railway services to stimulate domestic tourism and attract foreign tourists; increase promotional campaigns with the goal of Vietnamese people giving priority to using Vietnamese goods; implement preferential credit policies to solve the social housing problem for low-income workers, create peace of mind about accommodation, encourage work spirit, and improve living standards.

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