Vietnam’s parliament has sanctioned the extension of the Value Added Tax (VAT) reduction on goods and services until the conclusion of June 2024, aiming to fortify the nation’s economy.
The decision to maintain VAT at 8%, down from the usual 10%, intends to invigorate domestic consumption and production. This initiative comes as Vietnam, an export-dependent economy, grapples with challenges stemming from a global demand slowdown. Vietnam had previously raised the VAT to 10% at the outset of 2022.
The Vietnamese government emphasizes that the nation’s exports, reported until November 15th, have experienced a 6.4% decline to $306 billion USD compared to the previous year. This downturn is attributed to subdued global demand impacting the export of various commodities such as apparel, smartphones, and electronics.
Vietnam’s economic growth projection for this year stands at 5%, falling short of the government’s earlier target of 6.5% and indicating a deceleration from last year’s 8.02% expansion.
The extension of the VAT reduction underscores Vietnam’s proactive efforts to counter the economic challenges posed by weakened global demand. By stimulating domestic spending and production through this measure, the government aims to cushion the impact of dwindling export demands and foster an environment conducive to sustained economic recovery.