VCN- State revenue from crude oil may not reach what was forecasted at the beginning of the year due to the decrease in oil price and revenue from oil exports. Although the proportion of revenue from crude oil accounts for only a small percentage of total revenue, the reduction in oil revenue amid the Covid-19 pandemic is quite a concern. Thereby, the management agency has actively taken measures to respond.
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Export turnover of crude oil in the first two months of 2020 decreased 21.6% in volume and 21.3 % in value. Photo: Internet.
The impact not too great
The Covid -19 pandemic caused a sharp drop in demand for crude oil. The price of crude oil on the world market was US$50/ barrel at the end of February and around $24/ barrel in the second half of March. However, due to the delay in payment, Vietnam’s average oil price in the first two months of the year remained at $68/ barrel, higher than $8/ barrel compared to the estimated price; production is estimated at 1.8 million tonnes, equivalent to 19.9% of the plan. According to the Ministry of Finance, with such an oil price, the state budget revenue from crude oil in the recent two months reached VND 112,000 billion, equivalent to 32% of the estimate, up 44.4% compared to 2019.
The sharp drop in world oil prices also reduced revenues from Vietnam's crude oil exports. According to the General Department of Vietnam Customs, in the first two months of 2020, petroleum export was only 441,317 tonnes, turnover was $270 million, down 21.6% in volume and 21.3% in turnover compared to 2019.
In the State budget estimate for 2020 built by the Ministry of Finance, the oil price is estimated at $60 per barrel. For the current sharp decline, the State revenue will reduce.
According to Nguyen Minh Tan - Deputy Director of State Budget Department, Ministry of Finance, the impact of the oil price reduction is not too great. Because in recent years, the revenue has been restructured, so the revenue from crude oil and import-export duties has gradually decreased over the years (especially revenues from crude oil). If the average revenue from crude oil accounted for about 13% of total State budget revenue in 2011-2015, revenue fell sharply to about 4% in 2016-2018. By 2019, crude oil revenue is estimated to account for 3.2% of total State budget revenue. In 2020, it is estimated at VND35.2 trillion, accounting for only 2.3% of total State budget balance, down VND 11.6 trillion compared to the estimate in 2019 based on the estimated domestic exploitation quantity of about 9.02 million tonnes.
Balance revenue and save spending
Although the oil price reduction has not greatly affected, it still reduce the State revenue in the context of the complex development of Covid-19 pandemic, it is necessary to implement overall solutions. Regarding the budget balance, Vu Dinh Anh - an economist said that the world crude oil price is predicted by international organisations to drop deeply to about $20 / barrel. Although the revenue from crude oil accounts for a small proportion of the total budget balance revenue, the current average oil price dropped sharply compared to the estimate, so State revenue should be recalculated and rebalanced.
Recently, the Ministry of Finance has focused on restructuring State budget revenues in a more sustainable manner. In which, promoting the increase in domestic revenue of the total State budget revenue. If the domestic revenue accounted for about 68.7% of total State budget revenue in 2011- 2015, it increases to 81.5% in 2016-2020, it is expected to increase to 84% in 2020. However, revenue management still needs to be further strengthened. In administration, there is close coordination between the tax authorities and customs authorities with party committees and local authorities in reviewing and strictly controlling revenue sources; timely removing obstacles for people and businesses; improving national competitiveness.
Especially, when revenues decrease and the pandemic has not stopped, the saving in spending is the most urgent requirement. For many years, budget spending has been more and more effective, in line with set goals, with the estimates and ensure the essential tasks. Along with that, management and financial supervision in the economy have become better and better.
On the other hand, to achieve a sustainable revenue, we must support businesses, promote economic growth, thereby, having a basis for increasing the State budget revenues. In 2020, the Ministry of Finance will continue to work with ministries, branches and localities to implement the general policy of the Government and the Prime Minister on removing difficulties in business production and improving the investment environment through administrative procedure reform, business conditions reduction, amendment and supplementation of policies in line with reality.
Two scenarios forecast impact of the Covid-19 pandemic on State revenue:
The first scenario: If the pandemic is controlled in the first quarter of 2020, the State budget revenue is estimated at VND 1,494.2 trillion, down VND 18.1 trillion (-1.2%) compared to the estimate; central budget revenue is expected to decrease by VND 9.4 trillion compared to the estimate, local budget revenue will fall by VND 8.7 trillion compared to the estimate.
The second scenario: If the pandemic is controlled in the second quarter of 2020, the State budget revenue is expected to reach VND 1,470 trillion, down VND 42.3 trillion (-1.6%) compared to the estimate; central budget revenue is expected to decrease by VND 23.5 trillion compared to the estimate, local budget revenue will decrease by VND 18.8 trillion compared to the estimate.
(Source: Report on Assessing the impact of the Covid-19 pandemic on Vietnam's Socio-Economic Development of the Ministry of Planning and Investment).
By Hong Van/Ngoc Loan