Containing Covid-19 outbreak to fuel Vietnam’s economic recovery
Vietnam’s GDP growth may reach 3.5-4% this year in case the pandemic is contained in September.
Once the pandemic is contained, Vietnam’s economy would soon recovery thanks to the solid economic performance in the first half of 2021, said World Bank’s Senior Economist Dorsati Madani.
|A garment factory in Hanoi. Photo: Thanh Hai|
Madani added in light of multiple challenges and risks from the pandemic, the economy has shown its resilience and dynamic over time, referring to the country alongside China as a handful of economies posting positive growth in 2020.
According to the economist, the steady recovery of major economies such as the US, China, and EU, which are also Vietnam’s major export markets, would be instrumental for Vietnam’s economic recovery.
In the latest Vietnam’s macro-economy report, the World Bank noted the vaccination campaign is a critical priority at the moment to cover at least 70% of the adult population.
“The government should use fiscal policy to boost domestic demand in the short term, by accelerating the disbursement of the public investment programs and providing further income support to affected households to help the recovery of private consumption,” stated the report.
Support to businesses, especially small family businesses, would also help boost economic activities and employment, it added.
Positive FDI inflow
Given the severe Covid-19 situation and subsequent restriction measures to contain the pandemic, manufacturing activities have been disrupted and led to a drop of 4.2% month-on-month in the industrial production index in August.
Nevertheless, this fall in industrial activities was not as abrupt as the fall at the onset of the Covid-19 crisis in April 2020. In fact, performance was mixed across regions with major northern manufacturing centers posting double-digit growth rates in contrast to sharp output contractions in southern provinces that had shuttered factories, the report suggested.
Retail sales were also hit hard by the pandemic with a fall of 10.5% month-on-month in August, while the trade deficit widened to US$3.5 billion in the January-August period.
A positive note, however, remains in the FDI commitment at $14 billion during the period, around 2% lower than the same period of last year.
In fact, Vietnam attracted $2.4 billion of FDI commitment in August 2021, a 65% increase against the previous month.
“Higher FDI commitments were driven by newly registered capital flowing into manufacturing. This increase indicates foreign investors’ continued confidence in Vietnamese economy in the longer run,” stated the report.
Economist Yun Liu from the HSBC Bank shared the view as saying despite imminent challenges from the pandemic, Vietnam remains an attractive investment destination in the medium term.
“Vietnam’s robust fundamentals should help investors to look through near-term COVID-19 volatilities,” Liu said.
Indeed, South Korean investors are already starting to make the move. Samsung is set to expand its phone plant as early as in the second half of 2021, aiming to ramp up its foldable phone production by 47% to 25 million.
Meanwhile, LG Display has just received approval for an additional investment of $1.4 billion in its Hai Phong plant, aiming to boost its monthly OLED display output from 9.6-10 million to 13-14 million units.
Minister of Planning and Investment Nguyen Chi Dung during a meeting today [September 15] said in case the outbreak is fully contained in September, Vietnam’s GDP growth may reach 3.5-4% in 2021.
“While this forecast is lower than the Government’s target of 6.5% for this year, such result, if materialized, would still showcase the huge efforts from the entire political system,” Dung added.
To further boost growth in the remainder of 2021, the priority task would be a focus on fighting the pandemic at localities and avoid disruption to supply chains.
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