Vietnam remains steadfast in 2020 GDP growth target of 6.8% despite nCoV: PM

Vietnam remains steadfast in determination to reach the GDP growth target of 6.8% for 2020 although the ongoing outbreak of the new coronavirus (nCoV) is having a direct impact on the economy, according to Prime Minister Nguyen Xuan Phuc.

Overview of the meeting. Source: VGP.

Strong measures, including the restructuring of economic sectors, are needed to prevent a slowdown in economic growth, said Phuc at a monthly government meeting on February 5, adding adjusting the growth target is not the right mindset at the moment.

In the first quarter, the country’s GDP growth could slow by one percentage point, while adversities surrounding the Chinese economy would continue to impact Vietnam, Phuc asserted.

Regarding this issue, Minister of Planning and Investment Nguyen Chi Dung said the epidemic is expected to directly hit Vietnam's exports, particularly shipments of agricultural products, fisheries, textile, phones and spare parts. Meanwhile, the number of foreign tourists coming to Vietnam would decline due to the suspension of visa issuance to Chinese nationals and fear of the virus.

Dung added that indirect impacts would spread among agricultural production, industrial sectors and investment activities, among them, the agricultural sector would suffer the most, particularly such commodities with high export volume to China as vegetables, seafood and agricultural products..

“A growth target of 6.8% in 2020 is very challenging,” stated Dung.

A representative of the Ministry of Industry and Trade (MoIT) said the impact from the epidemic on Vietnam is inevitable, given the close economic linkage between Vietnam and China.

The extent of impact of the outbreak on Vietnam's economy, however, would depend on how long it would last.

According to the MoIT, all impacts are currently just temporary. However, if the epidemic persists to the end of the second quarter, there would be severe consequences on Vietnam’s economy.

The MoIT drew up different scenarios for Vietnam’s export-import activities. In case the outbreak is put under control within three months, Vietnam’s exports to China by the end of the first quarter are predicted to decrease from US$400 – 600 million, equivalent to a decline in growth of 5 – 8% year-on-year.

Minister of Agricultural and Rural Development Nguyen Xuan Cuong said the nCoV outbreak is causing negative impacts on agro-fishery-forestry trade between the two countries.

However, Cuong noted this would be an opportunity for Vietnam to adjust the production and business methods for agricultural products, implying an effort to reduce the sector’s dependence on one single market.

In the coming time, the Ministry of Agriculture and Rural Development (MARD) would cooperate with the MoIT and Vietnamese embassies around the world to promote trade and find potential markets, creating a breakthrough in diversifying export markets, Cuong said.

A report from HSBC on February 3 revealed in case China’s GDP growth declines by two percentage points in the first quarter and then recovers, Vietnam’s economic growth would fall by nearly 0.25 percentage points due to a slowdown in exports.

The State Bank of Vietnam (SBV), the country’s central bank, said the epidemic would make efforts to control inflation under 4% in 2020 more difficult than expected.

However, thanks to the strong foundamental of the economy over the last few years, there will unlikely be an economic stagnation, usually accompanied by high unemployment and slump in production.

The SBV stressed it has all resources needed to stabilize the exchange rate and intervene, if necessary.