Forecasting the economic indicators of vietnam from 2023 to 2025 signs of recession in the near future

economic indicators of Vietnam's economy from 2023-2025: signs of recession in thenear future" is an independent research work of our team.The citations, references, and statistics used

Vietnam National University

University of Economics and Bussiness

STUDENT’S RESEARCH PROJECT 2022 - 2023

economic indicators of Vietnam's economy from 2023-2025: signs of recession in thenear future" is an independent research work of our team.

The citations, references, and statistics used in the research paper are honest,from the original source

Hanoi, March 2023

Dương Văn ĐứcNguyễn Thị Hà Linh

THANK YOU

To carry out and complete this scientific research project, my group hasreceived support, help, as well as concern and encouragement from many friends andlecturers in the faculty Our research team would like to express our sincere thanks toThe Board of Directors of University of Economics - Vietnam NationalUniversity, Hanoi has organized very useful scientific research contests for us as well

as for all students of the school

The research team sincerely thanks the teachers of the Faculty of PoliticalEconomy who have always enthusiastically answered questions and provided usefulinformation to help the team be more confident in the research paper

Our team would like to express our deep gratitude to Dr Nguyen Thi AnhTuyet - lecturer at the Faculty of Political Economy has guided, and encouraged ourgroup during the research period We feel very fortunate and happy to receive herenthusiastic help The team wishes her good health and enthusiasm for future researchpapers

This is the first time our group has conducted a scientific research paper, so it

is still limited, and inevitably errors in the research paper We look forward toreceiving comments from lecturers and readers on the study to improve

Wishing all lecturers good health and success in their careers

Hanoi, March 2023

Dương Văn ĐứcNguyễn Thị Hà Linh

Đỗ Khánh Vân

LIST OF TABLES Figure 2.1 The unemployment rate of the force in the age group by gender

and by urban-rural areas

Figure 2.2. Value of exports and imports by continent, country block, and

some major markets in 2022 and compared to 2021

LIST OF PICTURES Figure 1.1. Show an economic cycle

Figure 1.2. V-shaped recession, as was the case with the US recession of

1953

Figure 1.3. U-shaped recession, as was the case with the US economic

recession of 1973 – 1975

Figure 1.4. W-shaped recession, as is the case of economic recession in the

United States in the early 1980s

Figure 1.5. L-shaped recession, as was the case with the Lost Decade

(Japan)

Figure 1.6. Deflation due to a decrease in aggregate demand

Figure 2.1. The GDP growth rate in 9 months compared to the same period

last year in 2011-2022 (%)

Figure 2.2. The unemployment rate of the working-age population in urban

and rural areas, Vietnam, 2010-2021

Figure 2.3. Unemployment rate by professional and technical qualifications

and by urban and rural areas in Vietnam in 2019

Figure 2.4. The unemployment rate of working age in the second quarter of the years 2011-2020

Figure 2.8. EU markets that import a lot of Vietnamese goods in 2021

Figure 2.9. NPL ratio of banks in Vietnam

Figure 2.10. Vietnam's inflation rate for the period 2010-2020

Figure 2.11. CPI growth rate compared to the same period last year

INTRODUCTION

1 Rationale

Socioeconomics of our country in 2022 takes place in the context that the world economy is facing great challenges, rapid and unpredictable fluctuations, and high instability; Inflation rose to its highest level in decades forcing countries to tighten monetary policy However, our economy in the past year had a strong recovery, the macroeconomy was stable, inflation was under control, and major balances were secured The improved business investment environment positively contributes to socio-economic recovery and

development, creating the trust and support of the people and the business community Some industries had higher growth than the year before the Covid-

19 pandemic

The year 2022 is a year when the global economy has become more aware ofthe terms "uncertain", "complex", and "unpredictable" Therefore, it is necessary to have analytical methods and forecasting techniques, which require Vietnam to constantly monitor and update assessments and take actions to continue maintaining macroeconomic stability and controlling inflation development, creating a favorable environment for reform, recovery, and development

Forecasting is a scientific method of predicting what will happen in thefuture, based on scientific analysis of collected data Forecasting in general andeconomic forecasting in particular is a relatively popular research field It iswidely applied in many areas from production business, and financialinvestment to higher macro-levels such as: formulating a strategy for socio-economic development Up to now, many forecasting methods have beenapplied, of which, according to Gordon, there are 8 main methods: prediction(according to individual analysis), trend extrapolation, expert method(synthesizing opinions of experts), simulation method, interaction matrixmethod, scenario method, decision tree method, and synthetic predictionmethod

The problem of analyzing and forecasting macroeconomic indicators isalways an important and urgent topic, especially for a developing country likeVietnam, an open economy with a small scale so it is vulnerable to adverseexternal fluctuations In the context that the world economy in general and

Vietnam's economy, in particular, appear more and more often unstable factors,the accurate analysis and forecast of the dynamics of economic indicators arevery important Macroeconomics plays an extremely important role in policymanagement and macroeconomic stability A good analysis and forecast resultswill help the economy avoid disruptions, limit risks and take advantage ofdevelopment opportunities Therefore, it is important to research and findssuitable forecasting methods for Vietnam's macroeconomic indicators As we allknow, economic theory has long been central to the construction of econometricmodels, econometric models are often built on assumptions, one of the mostchallenging requirements, especially since the coefficients are always invariantover time If the assumption of invariance of these coefficients is violated thenany estimated results from the model will be biased In fact, from the late 1990suntil now, it has been shown that the application of the linear time series model

in the empirical analysis of finance and macroeconomics is no longerappropriate in some developed countries with the strength of the financialsystem, the change in the structure of money, the change in policy institutions,the oil crisis, the food crisis, the fluctuations in the economic cycle, and eventhe development orientations of the economy In particular, policy interventionsmust be implemented quickly and strongly in terms of interest rates, moneysupply, exchange rates, and credit volume These changes cause abrupt effects

on the financial system as well as on macroeconomic variables that make thetime series appear nonlinear Therefore, nonlinear time series models areincreasingly taking a stronger position in the field of financial modeling andmacroeconomics In the past, when faced with nonlinear cases, modelers oftendealt with linear approximations, this solution more or less helpedmacroeconomic modelers to solve problems of some nonlinear cases However,this approach only solves 2 small number of individual cases and is notthorough Therefore, the nonlinear time series model designations have proven

to be useful in such cases For Vietnam, the application of traditional models toanalyze and forecast macroeconomic variables sometimes faces manylimitations: the data requirements are too complicated and beyond thecapabilities of the General Department of Vietnam In addition, foreign sources

of information and documents are also very lacking, fragmentary, andincomplete Such data are now almost nonexistent Moreover, for a country with

a developing economy like Vietnam, it is necessary to consider institutionalfactors, market openness, production background, and existing data that are notsuitable for the traditional model even when we use dummy variables.However, most of the research results and forecasts are calculated based on themodel with quite old and not updated data Besides, in recent years, domesticeconomic institutions, especially financial - budgetary - statistical institutionshave been constantly revised and supplemented; many new indicators were alsoadjusted and recalculated such as the official exchange rate being replaced bythe central exchange rate, GDP ; The domestic and global economies areconstantly fluctuating to new positions and changes in the oil market, the trend

of global trade protectionism, the results of the reform process, and thetransformation of the growth model certain influence on simulation results andforecasts; Along with that, the world and domestic economic prospects in thecoming time also have many potential risks All these problems are new factorsthat change the model structure, input data structure (data, variables), andpredictive simulation assumptions Of course, the results obtained from linearmodels can be false The research question is: is there any method to analyze &forecast macro indicators suitable to the historical context of macroeconomicdevelopment in Vietnam? Through a practical study of forecasting in Vietnam,along with the suggestion of the instructor, Dr Nguyen Thi Anh Tuyet, theauthors boldly chose the ARIMA time series forecasting model as the main tool

to study the scientific research topic"FORECASTING THE ECONOMIC INDICATORS OF VIETNAM from 2023 to 2025: SIGNS OF RECESSION IN THE NEAR FUTURE”.

2 Aims of the study

General aims

● Researching overview, theoretical methods of data analysis and forecasting, building a forecasting system that applies directly to macroeconomic indicators of Vietnam's economy, thereby providing an average forecast on macroeconomic indicators for the period of 2023 - 2025

Specific objectives

● Building an Economic Forecasting and Data Analysis System that offers many commonly available data entry ways The system presents diverse and rich forms, graphs, and reports In addition, the system stores flexible data and gives aggregate reports to assist managers in making the right judgment and decisions.

3 Object and range of study

3.1 The object of study:

● Key macroeconomic indicators in the period of 2018-2020 of Vietnam’s economy

3.2 Range of study:

Scope of the study on time: The authors will analyze the mainmacroeconomic indicators of the Vietnamese economy quarterly in the periodfrom 2018 to 2022 and provide orientations and solutions to the problemresearch in 2023 - 2025

Scope of study on space: The topic will focus on research within Vietnam

4 Research methods

Data collection method:

Secondary data: Collecting data on official websites and available research

works, official reports, documents, books, journals, scientific studies at alllevels, theses, and thesis, This method will be used in chapter 1 to generalizeresearch and concepts and used in chapters 2 and 3 to systematize issues Analysis and synthesis: Studying different documents and theories to findout and evaluate the current situation of the research object; clarifying thecontent and evaluation criteria for sustainable agricultural development inVietnam This method is used in Chapters 1 and 2 of the thesis

Summarizing experience: A method of reviewing past practical achievements,from theses, reports, and experiences of other countries in the world andsummarizing issues to conclude lessons for sustainable agriculturaldevelopment in Vietnam This method is used in chapter 1 of the thesis

− Multivariate correlation model is used to test the linearrelationship between independent and dependent variables

Research theory refers to documents and applications related to the content ofthe topic Compare and draw experience from models deployed in the world and

in Vietnam to learn from experience and draw lessons Analyze and synthesizecollected and researched documents, analyze and synthesize those sources ofinformation to evaluate the effectiveness and come up with effective methods

- First, build an early warning system for the financial crisis in Vietnam

- Second, provide data and forecasts for businesses to refer to and from there have directions for development and timely response for businesses

- Third, propose some solutions for the government to prepare timely response plans

5 Overview of the research

Foreign research papers

Linda Allen, Turan G Bali and Yi Tang (2012) “Does Systemic Risk in the Financial Sector Predict Future Economic Downturns?” measure of

aggregate systemic risk, designated CAT F IN, that complements bank-specific systemic risk measures by forecasting macroeconomic downturns six months into the future using out-of-sample tests conducted with U.S., European, and Asian bank data Consistent with bank "specialness," the CATFIN of both large and small banks forecasts macroeconomic declines, whereas a similarly defined measure for both nonfinancial firms and simulated "fake banks" have no marginal predictive ability High levels of systemic risk in the banking sector impact the macroeconomy through aggregate lending activity A conditional asset pricing model shows that CATFIN is priced for financial and nonfinancial firms

Roberta Capello, Andrea Caragliu and Ugo Fratesi (2015) “Spatial heterogeneity in the costs of the economic crisis in Europe: are cities sources of regional resilience?” measures the spatial heterogeneity of the costs

of the economic crisis and assesses the role of cities as sources of regional resilience in Europe Cities hosting financial activities have been severely hit during the crisis; however, they also host hard and soft territorial capital elements - high physical accessibility, access to information and knowledge, advanced functions, and agglomeration economies - generating intersectoral productivity growth and the ability to adjust to the crisis A scenario approach isused to capture the long-term costs of the crisis, applying a new version of a macro-econometric regional growth forecasting model (MASST), recently updated to take account of the crisis Results show that cities play a role in the resilience of regions; the quality of production factors hosted, the density of external linkages and cooperation networks, and the quality of urban

infrastructure give greater economic resilience to cities, and to the regions hosting them.

Serena Ng and Jonathan H Wright (2013) “Facts and Challenges In

from the Great Recession for Forecasting and Macroeconomic Modeling”

provides a survey of business cycle facts, updated to take account of recent data.Emphasis is given to the Great Recession, which was unlike most other postwar recessions in the United States in being driven by deleveraging and financial market factors We document how recessions with financial market origins are different from those driven by supply or monetary policy shocks This helps explain why economic models and predictors that work well at some times do poorly at other times We discuss challenges for forecasters and empirical researchers in light of the updated business cycle facts

YM Tang, Ka-Yin Chau, Wenqiang Li, and TW Wan (2020)

“Forecasting Economic Recession through Share Price in the Logistics Industry with Artificial Intelligence (AI)”: Time series forecasting

technology and related applications for stock price forecasting are gradually receiving attention These approaches can be a great help in making decisions based on historical information to predict possible future situations This research aims at establishing forecasting models with deep learning technology for share price prediction in the logistics industry The historical share price data of five logistics companies in Hong Kong were collected and trained with various time series forecasting algorithms Based on the Mean Absolute Percentage Error (MAPE) results, we adopted Long Short-Term Memory (LSTM) as the methodology to further predict share price The proposed LSTM model was trained with different hyperparameters and validated by the Root Mean Square Error (RMSE) In this study, we found various optimal parametersfor the proposed LSTM model for six different logistics stocks in Hong Kong, and the best RMSE result was 0.43% Finally, we can forecast economic recessions through the prediction of the stocks, using the LSTM model

Domestic research papers

The impact of the global economic crisis on Vietnam's

macroeconomics (2012) by Assoc., Ph.D Ha Thi Thieu Dao focused on

assessing the impact of the economic crisis on the Vietnamese economy throughdirect investment, indirect investment, remittances, and foreign trade; evaluate Vietnam's policy responses to reduce this impact and suggest solutions to deal with the fluctuations of the world economy from 2008 to 2013

The risk of recession in major economies affecting Vietnam's economy in 2023 (2022) by author Hai An, provides objective and specific

assessments and judgments based on calculated data according to the model NiGEM model to forecast the impact of major economies on Vietnam in 2023

``RESEARCHING MODEL FORECAST THE CENTER EXCHANGE RATE USD/VND BY THE ANALYTICAL TECHNIQUES OF TIME SERIES BOX-JENKINS ARIMA”, by TRẦN THỨ BA (2018). The researcherbuilds and selects the model that best predicts the average exchange rate forUSD/VND The method is implemented using the analysis technique of timeseries Box-Jenkins ARIMA (autoregressive integrated moving average) with theaverage center exchange rate data for a period (monthly) from the year 2005 to

2016 (2005M01 - 2016M12) The research data is collected by the author on theInternational Monetary Fund's website The main objective of this report is toapply the ARIMA model as well as analytical techniques to construct a modelthat forecasts the monthly exchange rate (average exchange rate) of USD/VND

In addition, the study also aims to suggest methods and analytical techniques oftime series to help investors and enterprises develop the models that forecast thedaily exchange rate or buying exchange rate, and selling exchange rate offinancial institutions

Vietnam in the face of difficulties and challenges of the world economy (2022) Dr Nguyen Thi Huong assessed and stated clearly the arguments about

the world economic recession that are increasingly evident, besides assessing Preliminary assessment of difficulties before, during, and forecast of the following difficulties that the Vietnamese economy may face in the context of the global economic recession

Nonlinear time series model in analyzing and forecasting

macroeconomic indicators in Vietnam (National Economics University student): Using nonlinear regression model (STR) applied in the country In

addition, an overview of empirical research on inflation and money demand by smooth transition regression model in countries around the world From there,

we can draw from Vietnam's research experience and propose some policies through the analyzed models

APPLICATION OF THE SCIENCE COMBINED REGRESSION MODEL FOR THE INFLATION RATE IN VIETNAM IN 2015 (Nguyen Thi Phuong Thao) Research has shown that Vietnam's inflation of the months

in 2015 is no longer worth it concerns as in the past due to the somewhat reasonable policies of the Government in recent years as well as external conditions such as the recent decrease in gasoline prices, and the weak demand

of the economy Only when inflation is controlled can we focus on stabilizing and growing other macro factors of the economy

Research gap

In general, studies so far have shown that the causes of recession are caused

by a combination of endogenous and exogenous factors In addition, the topicsalso pointed out the impact of the economic recession on the Vietnameseeconomy by identifying channels of direct investment, indirect investment,remittances, foreign trade, financial system, etc - banking, import and export,operations of the stock market, the market for goods and services, the real estatemarket, etc and pointed out the solutions to prevent the recession are to usefiscal policy and currency However, the social context has changed differently,

so the causes or impacts of the recession on the Vietnamese economy will alsochange

Therefore, our research team chose the topic: "Forecasting economicindicators of Vietnam's economy in the period of 2023-2025: Signs of economicrecession in the near future" to be able to clarify Further, analyze more deeplythe signals of recession, and their impact on Vietnam's economy and then offersolutions to improve and avoid the above situation However, with the group'shuman resources and experience, it is not possible to analyze all indicators ofthe Vietnamese economy Therefore, the group chose the ARIMA model tostudy and forecast three important economic indicators of the economy: GDP,inflation, and the unemployment of the working age; to forecast the recession ofthe Vietnamese economy

6 Structure of the study

In addition to the introduction, conclusion, and references, the research project consists of 4 chapters:

CHAPTER 1: THEORETICAL BASIS

CHAPTER 3: REAL STATE OF VIETNAM ECONOMYCHAPTER 4: RESEARCH MODELS AND RESULTSCHAPTER 5: CONCLUSION AND RECOMMENDATION

CHAPTER I: THEORETICAL BASIS

1 What are economic indicators?

Economic indicators are a part of economic data, with values used andreflect the performance of the economy This index is tied to ongoing economicactivity and usually has a macroeconomic scale Economic indicators includemany factors of the economy, some important factors can be mentioned asfollows: Gross domestic product (GDP), Investment capital, Unemployment(especially in working age), Import-Export, Banking, and Inflation,

Gross Domestic Product (GDP): is a measure of the total output and totalincome of an economy and represents the output of production produced byresident units within the economic territory of a country It is one of the mostimportant economic variables of the national economy and the best indicator of

a society's economic well-being

Unemployment: a state in which a worker wants to find a job but has notfound a job or is not employed by an organization, company, or community.The unemployment rate is the percentage of unemployed people out of the totallabor force of a society The working age unemployment rate is the percentage

of people of working age (15 – 60 years old for men and 15 – 55 years old forwomen) who are unemployed out of the total labor force of society

Inflation: is a continuous increase in the general level of the economy and

it is also understood as a phenomenon of money Inflation has 3 levels: Naturalinflation (0 – less than 10%), Galloping inflation (10% to less than 1000%), andHyperinflation (over 1000%)

Economic forecasting is the process of making predictions about thegrowth or decline of the economy, based on economic indicators such as GDP,inflation, unemployment or financial deficit, …

2 What is an economic recession?

A recession is defined in macroeconomics as a decline in real grossdomestic product for a period of two or more consecutive quarters in a year, inother words, a persistently negative rate of economic growth in two quarters.However, this definition is not widely accepted, the National Bureau ofEconomic Research (NBER) of the United States offers a more vague definition

of a recession than “a decrease in economic activity across the globe” the wholecountry, lasting many months”

A recession can involve a simultaneous decline in economic indicators ofoverall economic activity such as employment, investment, and corporateprofits Recession periods can be associated with lower prices (deflation), orconversely rapid increases in prices (inflation) during peak inflation

A recession is a phase of the business cycle, also known as the businesscycle It is the fluctuation of real GDP in the sequence of three phases,respectively: recession, recovery, and boom Since the recovery phase issecondary, the economic cycle can also be divided into two phases: boom andbust

Figure 1.: Show an economic cycle

Source: Khoitrithucso.com

Economic recession at a low level, i.e GDP decreases but still has apositive value, is called an economic downturn A prolonged and severeeconomic downturn is known as the Economic Crisis The current globaleconomic crisis is the most severe recession since World War II

3 Classification of economic recession

Economists often describe recessions in the shape of quarterly growthgraphs There are the following types of recessions:

3.1 V-shaped recession

A type of recession in which the recession phase is short and the recessionrate is large; at the same time, the recovery phase is also short and the recoveryspeed is fast; The point of change of direction between these two phases isobvious

Figure 1.2: V-shaped recession, as was the case with the US recession of 1953

Source: Wikipedia

3.2 U-shaped recession

A type of recession in which the recovery phase occurs very slowly Theeconomy, after a strong recession, enters a difficult period to get out of therecession During a recession exit, there can be alternating quarters of positivegrowth and negative growth

Figure 1.3: U-shaped recession, as was the case with the US economic recession of 1973 –

Figure 1.4: W-shaped recession, as was the case in the US recession in the early 1980s

Source: Wikipedia

3.4 L-shaped recession

A type of recession in which the economy falls into a serious recession andthen does not get out of recession for a long time Some economists call thisrecession an economic crisis

Figure 1.5: L-shaped recession, as was the case with the Lost Decade (Japan).

Source: Wikipedia

4. Causes of economic recession

Recession is a combination of internal cyclical factors and external shocks

of the market economy

4.1 Review from schools of economics

We will go through some of the reasons according to different schools ofeconomics:

4.1.1 Keynesian school

According to Keynes, the marginal propensity to consume from nationalincome decreases as national income increases, which increases saving in theeconomy On the other hand, the saving paradox shows that, when peopleincrease their savings, it leads to a decrease in aggregate demand And it is thedecrease in aggregate demand that causes a recession or economic crisis,businesses have to reduce production, and workers are unemployed

4.1.2 Austrian school of economy

The Austrian school of economics points out that the cause of the recession

is government intervention in the market

According to this school, a recession is caused by the wrong economicplans of individuals, a business plan, or a consumption plan When all plans gowrong, there is a recession For all individual economic plans to go wrong,direction must be given, for only the government has the power to direct themarket

4.1.3 Monetarism

The monetarists view that economic recession is the result of poor moneymanagement, they criticize government intervention in the market According tothem, the market is inherently self-correcting, when there is governmentintervention in monetary policy, aggregate demand fluctuates

4.2 Observation from reality

4.2.1 Global financial volatility

This is an important factor and a major cause of economic recessions.Many countries around the world have fallen into recession since Russia went towar with Ukraine

When the world experienced the Covid-19 pandemic, causing the wholeworld to impose blockade measures, pushing the global economy to almost a

standstill It is also the cause of the decline in aggregate demand worldwide.Inflation has been around the world for a long time, and central banks havecontinued to raise interest rates to reduce demand for consumer goods andservices to contain inflation.

4.2.2 The price of input material has increased dramatically

The increase in input prices leads to an increase in output prices, while theincrease in income does not keep up with the increase in prices, which alsoleads to a decrease in aggregate demand A decrease in aggregate demand willagain affect aggregate supply The lack of fossil fuel supplies from Russia andthe UK due to US and European restrictions on Moscow makes the recessionmore visible especially in the Europe region

4.2.3 Wars

A cause that does not seem to have much effect, but it is the cause of thesudden increase in the price of input materials At the same time, military andpolitical tensions are among the biggest risks to the world economy Solutionsand sanctions to end the conflict between Russia and Ukraine have not yetshown clear results, the battle for high-tech supremacy between the US andChina is becoming more intense at the beginning of this year after the USbanned the transfer of its modern semiconductor technology to China

4.2.4 Neutral factors

In addition to the above exogenous factors, we need to consider the factorsthat are classified as neutral (both endogenous and exogenous):

4.2.4.1 Mistakes in the management of macroeconomic policy.

Like the Austrian school and the monetary school, Krugman also criticizedgovernments He said that governments around the world were wrong in their policies

to restore and stimulate their economies For example, US and European restrictions

on Russia gradually backfired

4.2.4.2 People's expectations and crisis of confidence

When one of the above causes occurs, people's income expectations willdecrease, and they will increase their savings The increasingly severe decline inexpectations will lead to a crisis of confidence

5 Consequences of the economic downturn

The economic downturn creates challenges, but it also brings opportunities forthe economy

5.1 Challenges from the economic recession

⮚ Foreign investment capital dropped sharply: The attraction of foreign investmentcapital is an important factor to determine the success of the economy But during

a recession, investment cuts due to fear of foreign investors are inevitable On theother hand, aid also decreased due to the recession, which is a common situationfor all countries

⮚ Investment and domestic consumption plummeted: When the economy fell intorecession, domestic consumption fell due to lower disposable income andincreased investment risk, and foreign direct investment inflows directly andindirectly, declined because of concerns about economic instability, and investorstend to withdraw capital due to concerns about investment risks

⮚ Unstable balance of payments:

The economic recession led to a rapid decline in import demand in the world asconsumers around the world tightened their spending, leading to a decline inexport activities to the international market Consider the equation:

NTR: net asset income (such as investment returns, stock dividends, bond yields,etc.) generated when citizens of one country have productive assets in anothercountry.

Since X, M↓ → CA are affected, consider the equation

BOP = CA – KA

With BOP: balance of payments

KA: capital account balance

As a result, the BOP is also affected

⮚ Growth rate decreases: When an economic recession occurs, it is inevitable that aseries of business activities are forced to dissolve, and at the same time, a decrease

in consumption, investment, and trade balance deficit trade leads to a furtherdecline in the GDP of the economy, the inevitable consequence is that economicgrowth slows down

⮚ Deflation: Cutting spending when an economic downturn occurs makes therecession worse, leading to deflation Deflation is a persistent decrease in theoverall price level of the economy The main cause of deflation is total demandreduction, which can use the AD-AS diagram to illustrate this Initially, aggregatedemand corresponds to road AD The equilibrium point of the economy is point E

at the intersection of the two curves AD and AS road (road total supply) Then,aggregate demand decreases, and the AD curve shifts parallel to the left, so that

the AD curve intersects the AS curve at point E' E' is the new equilibrium of theeconomy and compared to the old equilibrium E, Quantity and the general price isreduced

Figure 1.6: Deflation due to a decrease in aggregate demand

Source: Wikipedia

⮚ Social security issues: The economic recession has a negative impact on theeconomy, leading to the tendency of income inequality and the gap between richand poor in the society is likely to increase It also causes social unrest due toincreased crime

⮚ The collapse of the financial system and bubble markets

● The collapse of the financial system: The economic recession made thefinancial situation more unstable, investors began to face difficulties in cashflow caused by the debt spiral, the selling wave sell-off as none of thecounterparties were able to sell at the previously quoted high asking price,leading to a massive liquidity crunch and sudden vertical collapse of thefinancial markets, causing prices to fall Stocks plummeted, investors panicked,the stock market went down and stocks were sold out massively Besideshaving negative effects on the stock market, the economic downturn also

makes banks difficult, some banks lose their liquidity, which can cause thecollapse of banks Due to the increase in bad debts, borrowers are no longerable to repay loans and depositors panic to withdraw their deposits, causingcredit quality to decline and bad debts to increase faster than credit growth.

● The collapse of the bubble markets: The pre-recession bubble markets such asthe stock market, and the real estate market will be at risk of bursting after aperiod of overheating

5.2 Opportunities from recession

Recession is an opportunity for developing countries, at this time developingcountries can access high-tech production processes brought about by deflation.Besides, this is also an opportunity to reform long-standing inefficientorganizations, an opportunity to purify and strengthen the economy

The redistribution of economic power in the world: economic reasons have been adetermining factor in the balance of power between countries Countries that recoverquickly and develop strong economic potential will occupy a more important position

in the new power order

6 General solution to economic recession

6.1 Fiscal policy

After the 1930s, in order to restore the economy ravaged by the great depression,

on the basis of Keynesian economic theory, countries applied macroeconomicregulation with fiscal policy as the main focus decision

As for fiscal policy, the anti-crisis practice in other countries shows that whenmonetary policy becomes "short of breath" in its role of influencing the expansion ofthe money supply and stimulating the economy, many governments will switch tofiscal policy In particular, to deal with economic shocks, the fiscal policy still playsits dominant role, as in the crisis in Japan in the 1990s, most recently in the response

of the countries to the 2008-2009 world financial crisis

At the initial stage, when providing solutions on fiscal policy aimed atrecovering the depressed economy, it is expected that the recession will last, therefore,fiscal policy will have a negative impact enough time to take effect

Fiscal policy is implemented in two directions: tightening and easing Tightening orloosening fiscal policy is done through tools such as budget spending, and taxes.

6.2 Monetary Policy

From the 1980s onwards, monetary policy became more prominent because:

●First, there is a view that fiscal policy based on D Ricardo's theory of relativeadvantage is ineffective;

●Second, monetary policy can maintain a stable and minimal gap between actualand potential output levels;

●Third, in developed countries, there is a trend towards stabilization and agradual decrease in the volume of government lending, while in developing countries,the restriction of foreign loans has reduced the possibility of government lendingimplementing anti-crisis fiscal policy

●Fourth, the delay in the actual formulation and implementation of fiscal policy,and now the economic recession cycles are becoming shorter and shorter, have madethe solutions of fiscal policy impossible timely bring into play the effect;

●Finally, fiscal policy is increasingly driven by the interests of political forcesmore than monetary policy Moreover, in periods of economic growth, people stilltend to have a prudent fiscal policy, even in the medium term, developing economiesstill prefer to use a system of self-adjusting tools without accepting unusual solutions.Not outside the general trend of the world, in Vietnam in recent years, monetarypolicy has been used as the main tool to adjust the macroeconomy This can be seenclearly in the monetary policy management process of the State Bank of Vietnam.There are two directions for conducting monetary policy:

●The tools of the monetary policy are carried out in the direction of tighteningand using the ceiling interest rate to control inflation such as increasing reserverequirements, issuing compulsory bills; base interest rate adjustment; increaserefinancing interest rates and increase the discount rate; increase the reserverequirement ratio

●The loosening monetary policy is used for periods of stopping the economicrecession to maintain the growth target of supporting interest rates, reducing interestrates such as lowering the basic interest rate; reducing discount rates and refinancingrates; reduce the reserve requirement ratio.

6.3 Effective macroeconomic regulation - the guarantee of economic stability

To stabilize the economy, it is necessary to combine both fiscal and monetarypolicies appropriately The explanation of the results of the use of macroeconomicregulatory tools in the past crises is still very much to be discussed, but it is clear that

it is necessary to adjust the economic policy enforcement mechanisms themselves inmacroeconomics

● First, central banks, especially in developing countries, need toimplement a transparent monetary policy, stabilize prices, and stabilize theinflation rate, contributing to overcoming the underlying causes ofmacroeconomic instability scale is the imbalance between saving andinvestment, thereby reducing vulnerability in volatile world economicconditions

● Second, It is necessary to combine the use of the discount rate

tool with other operating instruments because the discount rate is not a toolthat can solve the problem of excessive leverage and risk, as well as excessivearbitrage of the level of the price of some assets compared to the fundamentalindicators Therefore, it is necessary to increase the value of capital securitycoefficients if the leverage of banks is too large, to set a minimum level ofliquidity if the liquidity is low, and to lower the value of real estate whengranting credit mortgage in the condition that real estate prices need to bereduced, in order to limit the interest rate race, and bring the interest rate to areasonable level, the ceiling lending rate should be applied instead of thedeposit interest rate ceiling and credit growth term if the money supplyincreases rapidly These tools will prove to be more effective than the

discount rate for dealing with certain imbalances in the financial system anddiscouraging investors from engaging in unforeseen risky ventures.

● Third, combine inflation control with reasonable exchange ratepolicy implementation Developing countries with a low degree of opennessshould attach importance to maintaining exchange rate stability as much ascontrolling inflation

● Fourth, reduce the Government's debt burden by implementinggovernment expenditures on the basis of long-term programs that take intoaccount the cyclical nature of the economy, ensuring all non-budgetexpenditures The budget must be fully calculated when developing thebudget project

● Fifth, for the issue of providing additional liquidity during thecrisis through the provision of credits by central banks, repurchase and receipt

of certain types of assets as collateral, also means that Governments put ontheir balance sheets high-risk assets, and banks convert short-term savingsinto long-term loans, only to lose their liquidity Therefore, it is necessary touse the insurance mechanism and grant credits with a smaller amount than theguaranteed value In the post-crisis period, it is necessary to limit theGovernment's direct acquisitions so as not to increase the Government'sownership proportion in the economy, on the basis of completing theregulatory system, building a list of assets used as collateral, providingadditional liquidity to financial institutions with more stringent regulations

● Sixth, to perfect the automatic regulation system in the direction

of building a stricter progressive taxing scale and broader social allowances,

on the basis of harmonizing social development and introducing rules thatallow changes to be made Tax rates and subsidies as the economy moves into

a new phase of the business cycle Thus, taxes and subsidies will be increasedwhen a certain macroeconomic indicator falls below a specified level

● Seventh, in the context of macroeconomic fluctuations, it isnecessary to use fiscal policy to a higher extent, ensure the synchronous andsmooth coordination between monetary policy and fiscal policy, strengthenthe exchange of information between agencies in charge of implementingfiscal and monetary policies in order to control the money supply, ensureinflation targets, implement state budget estimates, and determine expecteddeficit size, financial support, foreign loan demand, and government bondissuance.

CHAPTER II: REAL STATE OF VIETNAM ECONOMY

Countries have to adjust their import-export policies and exchange rate policies toprotect domestic goods, so they face many barriers to Vietnamese exports

World economic growth in 2020 will decrease by 3.3%; in 2021 increased by5.8% and the forecast for 2022 increased by 3.1% Specifically, the US GDP growthforecast decreased from 3.9% to 1.6%, the euro area decreased from 3.3% to 2.5%;Japan decreased from 2.7% to 1.4%; China dropped from 5.0% to 3.3% According tothe report “Is a Global Recession Imminent” by the World Bank (WB) in September

2022, more than 90% of developed economies, 80% of developing economies, andmarkets All emerging markets have downgraded their growth forecasts for 2023

Although these projections do not point to a global recession in 2022-2023, fromthe experience of previous recessions, there are at least two factors that warn of arecession: Global growth demand weakened significantly in the previous year; Allprevious global recessions have coincided with sharp recessions or outright recessions

in some major economies

The World Economic Outlook Report July 2022 of the International MonetaryFund (IMF) said that a global recession is becoming more and more present when therisk of reducing growth is likely Economic performance was better than expected inthe first quarter of 2022, but world GDP fell in the second quarter of 2022 due to aslowdown in growth in China and some advanced economies The growthdeceleration risks mentioned in the World Economic Outlook for July 2022 arematerializing, with high inflation around the world, especially in the US and majorEuropean economies making this a reality The global financial situation has beentightened sharply China's growth has slowed markedly, reflecting the negative impact

of the Covid-19 pandemic and the conflict in Ukraine The forecast released by theIMF in July 2022 shows that global inflation in 2022 will be high (about 8.3%), and in

2023 it is likely to be lower but still quite high (about 5.3% - 7%) According to theOECD forecast in September 2022, inflation in G20 countries is about 8.2% in 2022and 6.6% in 2023 Inflation in some countries in 2022 and 2023 is forecasted asGermany at 8.4% and 7.5%; the UK at 8.8% and 5.9%; Italy at 7.8% and 4.7%; the

US at 6.2% and 3.4%; India 6.7% and 5.9%; China 2.2% and 3.1%

In the ups and downs of the world economy, this year, a number of countries areforecasted to continue to achieve good growth compared to 2021: India is forecasted

to grow at about 7.4%; the Philippines growth at about 6.5%; Malaysia's growth isabout 6.0%; Indonesia is about 5.4% In Southeast Asia, ADB forecasts thatIndonesia's 2022 growth will reach 5.4% (an increase of 0.4 percentage pointscompared to the forecast in April 2022), the Philippines will reach 6.5% (up 0 5percentage points), Thailand reached 2.9% (down 0.1 percentage points), Singaporereached 3.7% (down 0.6 percentage points), Malaysia reached 6.0% (unchangedcompared to the previous year) with the previous forecast) China's growth is forecast

to reach only about 3% due to the Zero-Covid policy and is adversely affected by theworld economy.

● Challenges for Vietnam's economy

Vietnam's economy has overcome difficulties and challenges after nearly threeyears of being affected by the Covid-19 epidemic as well as the risk of energy andfood insecurity due to armed conflicts and geopolitical issues in the world Theforecast and positive assessment of international organizations and the economicgrowth results of the past nine months of our country have clearly shown that

In the period 2015-2019, Vietnam's economy achieved a good growth rate, anaverage annual growth rate of 7.09%, but in 2020 and 2021 it will only reach 2.87%and 2.56% respectively due to the impact of the pandemic Covid-19 In 2022, GDPgrowth will reach 8.2%, exceeding the set growth target However, the three-yearaverage growth rate (2020-2022) is only from 4.28% to 4.45%, much lower than theaverage growth rate of the previous 5 years To achieve the growth target from 6.5%

to 7% set out in the 5-year socio-economic development plan 2021-2025, the averagegrowth rate for the remaining years must reach about 7.4% - 7 5% An open economylike Vietnam will be greatly affected by the current fluctuations of the worldeconomy The world economy in 2023 is forecasted by most internationalorganizations to slow down, increasing the possibility of a short-term recession;persistent high inflation in many countries; Strategic and geopolitical competitionbetween major countries, conflicts between Russia and Ukraine, and the adjustment ofpolicies of major countries create many great fluctuations to financial market stability,currency, energy security, food security, and regional and global geopolitical issues;natural disasters, epidemics, climate change, etc For Vietnam, 2023 is a pivotal yearfor the implementation of the Socio-Economic Development Plan for the 2021-2025period

1.2 The inner cause

1.2.1 The internal structure of our country's economy has many shortcomings

We will start with Keynes's Aggregate Demand formula using the expendituremethod to get a clearer and more general view:

I (Investment): Total private investment in 2020 is USD 1,142 million - notmuch increase compared to 2019 Many investments are flowing into technologystartups that provide disruptive solutions for retail and services, such as onlinehealthcare booking and consultation, e-commerce, human resources, and recruitmentplatforms However, the deal size is still modest The healthcare sector is on the rise.The total export turnover of the economy is low, and our economy has to import

a lot of capital from abroad (through attracting FDI), so when the capital supply fromabroad is affected by the world economic crisis the world immediately affected ourcountry quite a lot

In short, all three pillars of our country's economy: SOEs, FDI, and export are all affected by the world economic crisis, so they have had a strong impact

import-on our ecimport-onomy

2 The current situation of economic recession in Vietnam

2.1 Growth of GDP

Figure 2.1 The GDP growth rate in 9 months compared to the same period last

year in 2011-2022 (%)

Source: General Statistics Office

According to the above data, we can easily see:

- 2022 is the year Vietnam has the highest economic growth rate

- 2018-2019 is the period when Vietnam has the most stable economic growthrate

- In the period from 2020-2021, the growth rate tends to decrease This is theimpact of the Covid-19 pandemic on our economy: In 2020-2021, especially in

2021, our country's growth rate is low, reaching only 2.58%, even in the firstquarter of this year In the third quarter of 2021, Vietnam's economic growthrate will also be reduced by 6.17%, which is explained by the impact of theCOVID-19 outbreak on major export markets - namely the United States andEurope

- Vietnam's economic growth rate (GDP) in 2022 is estimated to increase by8.02% over the previous year, reaching the highest increase in the period 2011-

2022 due to the recovery of the economy The service sector recovered andgrew stronger with the growth rate in 2022 reaching 9.99%, the highest in theperiod 2011-2022 Specifically, the number of market service industriesincreased sharply, contributing much to the growth rate of the total added value

of the whole economy

According to the General Statistics Office of Labor, employment in the fourthquarter of 2020 showed many signs of improvement compared to the previous quarter,but due to the impact of the Covid-19 pandemic, the unemployment andunderemployment rates for the whole year 2020 is higher than 2019 while the number

of employed people and the income of wage earners are lower than the previous year.The labor force participation rate in the fourth quarter of 2020 in Hanoi city issignificantly lower than that of the whole country, at 69.1%, and for the whole year

2020 is 67%

The labor force aged 15 and over in the first 9 months of 2021 was estimated at50.4 million people, a decrease of 250,000 people compared to the same period lastyear; the number of unemployed people of working age in this period was more than1.3 million people, 126.5 thousand people higher than the same period last year Theunemployment rate for working-age was 2.99%, up 0.35 percentage points over thesame period last year The unemployment rate in urban areas is 4.02%, 1.64percentage points higher than in rural areas

In the third quarter of 2021, the complicated developments of the fourth

Covid-19 epidemic made the workforce at the lowest level since the outbreak At a pressconference to announce socio-economic statistics for the third quarter and nine

months of 2021 on September 29 in Hanoi, Director General of the General StatisticsOffice Nguyen Thi Huong said: The Covid-19 epidemic is developing complicatedly.Complexity has negatively affected the labor and employment situation in the thirdquarter of 2021; The unemployment rate and underemployment among working-agepeople increased to the highest rate since the first quarter of 2020 Laborers aged 15years and older with jobs in the third quarter of 2021 were 47.2 million people, down2.6 million people, and decreased by 2.7 million people compared to the same periodlast year This trend is also seen in both urban and rural areas The number ofunemployed people of working age in the third quarter of 2021 was more than 1.7million people, an increase of 532.2 thousand people compared to the previous quarterand an increase of 449.6 thousand people compared to the same period last year Theunemployment rate of working age in the third quarter of 2021 was 3.98%, an increase

of 1.36 percentage points compared to the previous quarter and an increase of 1.25percentage points over the same period last year The complicated developments ofthe fourth Covid-19 epidemic and the prolonged social distancing period in manylocalities have increased the unemployment rate in the third quarter of 2021, farexceeding the usual 2% figure

According to the labor and employment survey results in the third quarter of

2021, the number of employed people in Hanoi decreased by 5.3% compared to theprevious quarter and by 4.5% over the same period last year The unemployment rate

in the third quarter of 2021 was 2.7%, an increase of 0.3 percentage points compared

to the previous quarter and an increase of 0.6 percentage points over the same period

in 2020

The Hanoi Employment Service Center forecasts that the number of employeesaffected by the COVID-19 epidemic will be reduced to 1 to 1.2 million workers Thenumber of unemployed workers ranges from 5 to 6 thousand workers

- Reason.

● Covid-19

● Poor foreign language skills

● Labor productivity is still poor

● The requirements of workers are higher than their capacity

● Lack of soft skills

● Competence really doesn't match the degree

● Lack of career direction

● Passivity in the job search process

2.2.2 Unemployment situation in Vietnam 2018-2020

The results of the Population and Housing Census as well as the annual Labor andEmployment Surveys conducted by the General Statistics Office, the Ministry of Planning and Investment show that the unemployment rate in Vietnam is often very low

- According to statistics, the unemployment rate of the age force has decreased gradually over the years In 2019, the unemployment rate of the force in the agegroup was only 3.55% The unemployment rate of the male labor force in the age group as of 2019 was 3.66%, and 3.42% of the female labor force In urbanareas, the unemployment rate of the working-age labor force is 3.37% and in rural areas, it is 4.73%

It is also noteworthy that the unemployment of young workers (15-24 years old) accounts for a large proportion of the total unemployed workers (about 49% in 2017), tends to increase, and is always higher than the general average

=> Creating jobs for young people has been and is a big challenge for the economy That is not to mention the number of trained and qualified workers who have jobs but

do simple jobs or work contrary to their training qualifications

Figure 2.2 The unemployment rate of the working-age population in urban and rural

areas, Vietnam, 2010-2021 (%)

Source: Kinhtedothi.vn The majority of Vietnam's population resides in rural areas, but the unemployment rate in rural areas is nearly twice lower as in urban areas Differences in workers' access to information about employment, technical expertise, and flexible job choice are the main reasons for this.

- Populations with different technical qualifications also have very different unemployment rates Data from the 2019 Population and Housing Census showed thatpeople with a university degree had the lowest unemployment rate (0.6%), followed

by people with primary qualifications (1.3%), while the population with a college degree has the highest unemployment rate (3.19%); people with university degrees have the second highest unemployment rate (2.61%) This is the case in both urban and rural areas

Figure 2.3 Unemployment rate by professional and technical qualifications and by

urban and rural areas in Vietnam in 2019

S ource: Kinhtedothi.vn

Unemployment rates of people with college and university degrees are generally high This is because low-skilled people are often willing to do simple and non-specialized jobs with low wages, while highly-skilled people try to find high-quality jobs more suitable salary In addition, the recruitment policy of employers for the group of highly qualified workers also affects this ratio, because the requirements for trained workers at higher levels are more stringent compared with simple labor

Figure 2.1 The unemployment rate of the force in the age group by gender and by

urban-rural areas

Source: General Statistics Office

Figure 2.4 Unemployment rate of working age in the second quarter of the years

2011-2020 (%)

S ource: General Statistics Office

Before the impact of the COVID-19 epidemic, 2020 was the year with the highest unemployment rate in the past 10 years at 2.73%, the first time workers' incomes decreased by 5.1% in the 5 years period 2016 - 2021

The unemployment rate increased the most in the group of workers with low technical qualifications:

- The unemployment rate of working age in the second quarter of 2020 was

2.73%, of which the unemployment rate of working age in urban areas was 4.46%, thehighest in the past 10 years, 1.36 percentage points higher than the same period last year

- In the second quarter of 2020, the unemployment rate in the working age group

of workers with intermediate or higher professional and technical qualifications still decreased compared to the previous quarter while the group of workers with low technical qualifications ( elementary) or no technical qualifications increased again

=> This shows that when the economy is in shock, low-skilled or unskilled workers face more difficulties in job opportunities than workers with medium and high-level technical qualifications

According to GSO, the COVID-19 epidemic that appeared in Vietnam at the end

of January 2020 has affected the labor and employment of 30.8 million people aged

15 years and older The labor force and employed workers both decreased by more than 2 million people, the largest decline in the past 10 years Although COVID-19