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Vietnam Fiscal November 2020

Vietnam: National Assembly approves constrained 2021 budget to rein in deficit

On 12 November, the National Assembly approved the 2021 state budget. Relative to the 2020 budget—approved before the Covid-19 pandemic—both revenue and expenditure are seen declining notably, and the budget deficit is seen narrowing. The upshot is a fairly tight budget as the government prioritizes fiscal sustainability, which could weigh somewhat on momentum next year.

In 2021, total spending is seen at VND 1,687,000 billion (roughly USD 73 billion)—down from 2020’s original estimate of VND 1,747,100 billion—with the government postponing a salary hike for public sector workers and aiming to reduce payrolls in a bid to save costs. Revenue is projected at VND 1,343,330 billion (2020 original estimate: VND 1,512,300 billion). That said, revenue has plummeted so far this year due to the impact of the pandemic, and revenue in 2021 is seen up 1.5% from the revised 2020 outturn.

The 2021 budget aims to narrow the fiscal deficit to 4.0% of GDP, which our panelists judge slightly optimistic given likely elevated spending pressures. However, the government’s 6.0% GDP growth target for next year appears easily achievable.

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