Fitch Solutions lowers Vietnam growth forecast
Fitch Solutions has lowered its growth forecast for Vietnam to 6.3 percent this year due to the possible impacts of the coronavirus.
A man works in a textile factory in Binh Xuyen District, northern Vinh Phuc Province on February 19, 2020. Photo by VnExpress/Ngoc Thanh.
The company, a subsidiary of credit rating firm Fitch Group, said in a release on Wednesday the downward revision from an earlier forecast of 6.8 percent comes since the novel coronavirus epidemic could disrupt supply chains.
Vietnam’s manufacturing sector, which accounts for 16 percent of GDP, will come under heavy pressure as the result of the outbreak in China, a key source of raw materials and a major export market.
Small and medium-sized companies are likely to struggle in their search for alternative sources of feedstock at short notice, and underemployment of labor and work stoppages are likely, it said.
Services growth would also come under stress due to a major decline in tourism revenues as a result of Vietnam’s ban on flights and from China, its largest market, and a fall in tourist numbers from two other key markets, South Korea and Japan, it warned.
But it said growth is expected to rebound in the second half of the year when the virus is expected to be contained.
Trade could benefit from Vietnam’s ratification of the EU-Vietnam Free Trade Agreement (EVFTA) in the second half, which would eliminate tariffs on more than 90 percent of Vietnam’s exports to the bloc, the release said.
The Ministry of Planning and Investment had earlier forecast GDP growth could fall to a seven-year low of 5.96 percent this year from a decade-high 7.02 percent last year.