The Covid-19 outbreak in late July in the central coastal city of Da Nang and response measures could affect Vietnam’s economic recovery. However, its outlook remains bright and optimistic.
Positive signals
According to the World Bank’s latest economic report, titled “What will be the new normal for Vietnam? The economic impact of Covid-19”, although the Vietnamese economy suffered from Covid-19 in the first half of 2020, prospects remain positive in the short and medium term. Accordingly, Vietnam’s gross domestic product (GDP) is forecast to expand 2.8 percent in 2020 and 6.8 percent in 2021 in favorable conditions, and 1.5 percent in 2020 and 4.5 percent in 2021 in less favorable conditions.
World Bank Lead Economist and Program Leader for Vietnam Jacques Morisset said Vietnam would be the fifth fastest-growing economy in the world this year if its GDP achieves 2.8 percent growth as forecast.
Nguyen Anh Duong, head of the Department for General Economic Issues and Integration Studies under the Central Institute for Economic Management, said the Covid-19 outbreak in Da Nang may pose more difficulties for trade and production activities and delivery of goods, but negative signs regarding the future are not reliable.
Specifically, management agencies, policy makers and the business community have drawn on their experience from the initial outbreak and adapted to the new situation more quickly. Enterprises already know how to promote trade and production activities under the “new normal”, enhancing prospects that the economy and the business community will continue to respond effectively to the second wave of the Covid-19 pandemic, Duong said.
Investors have maintained the same positive attitude that they adopted in response to the first Covid-19 outbreak. For example, Singaporean investors still maintain their commitments to Vietnam despite the Covid-19 pandemic. In the first seven months of the year, Singapore rose to become the biggest foreign investor in Vietnam with more than USD6.4 billion.
In a meeting with Prime Minister Nguyen Xuan Phuc, Samsung Vietnam representatives affirmed the company’s commitment to set goals, contributing to the successful implementation of the Vietnamese government’s dual task of curbing disease and ensuring growth.
New growth drivers needed
Although great achievements have been made in economic development, some of Vietnam’s main growth drivers are gradually weakening. The main challenge for Vietnam will be finding new growth drivers to consolidate the expected recovery. The country’s traditional sources of growth - foreign demand and domestic consumption - are unlikely to return to their pre-crisis levels soon. In addition, Covid-19 has also caused a surge in inequality. For example, workers in service sectors have experienced bigger declines in their incomes compared to farmers.
The World Bank report suggests three complementary measures for the Vietnamese government to implement in order to avoid the Covid-19 economic trap and return to its trajectory of rapid and inclusive growth.
First, Vietnam should consider removing restrictions on international travel as the economy is dependent on foreign visitors and investments. Second, it is necessary to accelerate the execution of existing public investment program to enhance domestic demand. Third, the country should provide targeted support for the private sector, especially the hardest-hit industries such as tourism, through a combination of financial assistance and smart incentives.
Stefanie Stallmeister, acting country director for the World Bank in Vietnam, said Vietnam has a unique opportunity to increase its footprint in the global economy in terms of trade and investment.
Policies to support businesses and people are taking effect, contributing to maintaining trade and production activities, even under pandemic conditions.
Source: http://ven.vn/