Resurgence of Covid-19 further thwarts Danang's economic recovery

The resurgence of Covid-19 cases in Danang and the implementation of social distancing orders are set to further jeopardize the city and Vietnam’s efforts to reboot the gloomy economy.

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According to the latest announcement from the Danang People’s Committee, the stay-at-home order across the city took effect from July 26 until further notice.

During this period, people are urged to strictly follow anti-virus measures. Gatherings of over 30 people in public places are banned, directly affecting cultural, religious and sporting events, as well as non-essential services, including amusement parks, beauty parlors, karaoke and massage parlors.

Notably, Danang has now stopped receiving tourists for the next 14 days, starting from July 26 for safety reasons. The move, in spite of its necessity at this moment, has now made it increasingly difficult for a city, known as the tourist hub of South-Central Vietnam, to recover after being battered by the Covid-19 pandemic in the past six months.

Danang’s economy shrank by 3.61% year-on-year in the first half this year, marking its first contraction in 23 years since it became one of Vietnam’s five centrally-administered cities that also include Hanoi, Ho Chi Minh City, Can Tho, and Hai Phong. Danang is the only central-level city and among 12 provinces and cities in Vietnam registering negative growth in the period.

The city's services sector declined by 4.62% during the period, shaving off 2.98 percentage points from the city’s economic growth; construction and industrial sector was down 1.8%, or 0.39 percentage points, with agro-forestry-fishery being the only sector with positive growth at 2.28%.

Tourists are seen leaving Danang on July 26. Photo: quangngaitv.vn.

VnExpress cited Secretary of the Danang Party Committee Truong Quang Nghia as saying the city’s economy is at a dire situation in the face of Vietnam's GDP growing at 1.81% in the first half of this year.

For 2020, Danang has set a goal to attract nine million tourists, including three million foreign tourists, but it has been frustrated by Covid-19. Last year, the city welcomed 8.7 million tourists, up 13.4% year-on-year, of them 3.52 million were foreign tourists, up 22.5%, bagging US$1.26 billion, up 28% year-on-year.

Danang’s Statistics Office asserted the city’s spearhead economic sectors severely affected by the Covid-19 pandemic, including services that made up 64.35% of the city's GRDP growth in 2019. This is a major reason for the low economic performance.

In the city’s socio-economic report released on June 30 by the municipal Statistics Office, the city's GRDP during the January – June period was estimated at VND51.07 trillion (US$2.22 billion), down VND917.6 billion (US$40.03 million) year-on-year.

This puts Danang at 16^th out of 63 provinces and cities in terms of economic scale, down one notch against the 2016 – 2019 period. The city accounts for 1.36% of Vietnam’s GDP, 0.07 percentage points lower than the 1.44% during the 2017 – 2019 period.

A survey of 7,200 enterprises conducted by Danang's Statistics Office revealed 90% were affected by the pandemic during the first six months of the year, 58.4% of which are operating in non-essential services and were forced to suspend their operations during the social distancing order in April.

Year to June 15, 2,000 new enterprises were established in Danang, but the number of enterprises suspending operation and completed the dissolution process has risen 23% year-on-year to 1,300 and 400, respectively.

As a result, the labor market has also been severely impacted. Of the 180,000 laborers hit by the pandemic, 12,600 have their contracts terminated and 60,000 were forced to take unpaid leave.

Positive growth in doubt

At a meeting of the Danang People’s Council on July 6, Vice Chairman of the municipal People’s Committee Ho Ky Minh proposed three growth scenarios.

In the most optimistic one, Danang’s economy would grow by 1.3% year-on-year if all major trade partners of Vietnam in general, and of Danang in particular, could contain the Covid-19 pandemic within this quarter. However, given the complicated Covid-19 progression globally and the emergence of local coronavirus cases in the city, it is safe to say such an outlook is now increasingly far-fetched.

In the other two scenarios, Danang’s economy would suffer a contraction of up to 2.83% this year if Covid-19 impacts linger to the fourth quarter.

It is also worth mentioning that all these scenarios do not take into account an assumption that there would be an outbreak of the Covid-19 in the city.

In 2019, Danang’s economic growth was of the lowest among five central-level cities at 6.47% year-on-year, lower than the national average of 7.02% and below the city’s target of 8 – 9%.