Economic institutions and Macroeconomic policy

It can be seen that in recent years, the institutional and macroeconomic policies in Vietnam have been gradually established and developed with the rules, principles and regulations in various fields. These institutions exist from the fiscal, monetary, fiscal and monetary combination and financial stabilization. However, these institutions are still insufficient and deficient in comparison with good practices in the world.

In particular, although monetary institutions are becoming independent and have clearer aims, good practices around the world are slowly being introduced. The monetary policy is quite discretionary and lacks important principles. In particular, the policy-making process has not yet transparent. Fiscal institutions, meanwhile, are more complete, but their enforcement is lax. The institutional system of financial supervision has been gradually established and become more complete but still inconsistent and sometimes discretionary with sector development. In addition, the monitoring system is mostly internal/sectoral, while inter-sectoral monitoring is weak, leading to a lack of and/or overlap in the supervision of financial institutions and state agencies. The coordination among agencies in the planning and implementation of monetary policies – although improved, but not really tight. The monetary policy is significantly affected by fiscal expansion.

Due to those shortcomings, the restructuring of the institutional framework and macro policies for Vietnam is necessary. The ultimate objective of this macroeconomic stabilization framework is to maintain: (i) stability and long-term economic growth; and (ii) respond flexibly and in a timely manner in the short term, which is the ability to respond quickly and effectively to internal and external economic and financial shocks.

In order to achieve these goals, the principle of building a macroeconomic stabilization framework should be aimed at gaining the confidence of businesses, investors, financial markets and the people. At the same time, the institutional framework must be able to support sustainable development in the medium and long-term. Macroeconomic policies should be developed and promulgated with transparency and predictability. In addition, the institutional framework for macroeconomic stability needs policy autonomy and should be flexible enough to respond to changes in economic priorities and situations.

In addition, one of the current weaknesses of Vietnam economy, as well as many other developing countries, is about institutions that enhance enforcement, improve institutional efficiency, financial discipline and effectively adopt fiscal decisions, especially with regard to public expenditure and debt financing. In addition, the establishment of a macroeconomic stabilization framework must also be geared towards the application of new techniques, tools and approaches. This requires rreferences to other nation’s good practices in line with Vietnam’s conditions. With these principles, the institutional framework for macroeconomic stabilization will be developed based on monetary and fiscal institutions, financial stabilization policies and especially the coordination between these policies.

MASSEI’s research priorities in the field of macro-policy:

    • Building a sustainable, efficient and equitable tax system

    • Develop a fiscal policy system that supports long-term economic growth

    • Develop a decentralized system of budget revenue and expenditure between central and local authorities

    • Develop a monetary policy system targeting inflation control

    • Develop a regulatory framework for financial supervision to maintain a stable and secured financial system over the long term, and prevent / absorb crises or short-term shocks.

    • Develop institutional arrangements for fiscal, monetary and financial stabilization which are aimed at ensuring long-term macroeconomic stability.

    • Build a system of indicators for the business cycle of Vietnam.

Economic institutions and Macroeconomic policy