Vietnam to reboot the economy after novel coronavirus damage
Authorities and businesses are scratching their heads for solutions to reboot Vietnam’s economy as the new coronavirus hurts key industries.
A worker manufactures face masks at a factory in Hanoi. Photo by VnExpress/Ngoc Thanh.
The novel coronavirus (Covid-19) could slow Vietnam’s GDP growth from over 7 percent in 2019 to 6.09 percent this year if the disease is contained in Q2, the Ministry of Planning and Investment estimates.
If the disease is contained within Q1, growth for the whole year could hit 6.27 percent, still lower than the decade-high achievement last year.
"The epidemic’s impact on economic growth this year is very serious," said Deputy Minister of Planning and Investment Tran Quoc Phuong at a recent meeting.
Tourism will be the first to take a hit, with Covid-19 stripping industry revenue of between $7 and $15 billion this year, the Vietnam Tourism Advisory Board projects.
The calculation is based on an anticipated drop of 90-100 percent in Chinese tourist numbers, and 50-70 percent in domestic and other markets.
Localities have witnessed a drop in tourism since Vietnam first confirmed two cases of Covid-19 infection on January 23.
Hanoi has seen 19,300 international tourists cancelling hotel bookings as of February 6. Khanh Hoa Province, home to travel hotspot Nha Trang where 70 percent of tourists are Chinese, now has 5,000 empty rooms and 5,000 unemployed tourism staff thanks to the epidemic.
"It will take a long time for the industry to recover when the disease finally drops in severity," said Vietnam National Administration of Tourism Director Nguyen Trung Khanh.
Aviation is another victim. Vietnam Airlines, Vietjet and the country’s three other airlines estimate that the suspension of Vietnam-China flights could cause losses of over VND10 trillion ($430.5 million).
The epidemic has resulted in 640 flights a week between the two countries being canceled, or a loss of 400,000 passengers a month, according to the Civil Aviation Authority of Vietnam.
Nguyen Hong Ha, deputy director of Vietnam Airlines, said the company would have to bear vast refunding costs due to the changes, which could last until the disease is contained.
"This is a disaster to the aviation industry," said Do Xuan Quang, deputy director of Vietjet, the earliest Vietnamese airline to suspend flights to mainland China.
Manufacturing firms are also hurt by the outbreak with supply chains heavily dependent on China.
Local textile manufacturers have been struggling to source material from China as it shut factories to contain the outbreak. Almost 60 percent of Vietnam’s garment imports stemmed from China last year.
Tran Van Dang, owner of a handbag manufacturer in District 3, Ho Chi Minh City who regularly sources material from China, said there was no leather left when his factory resumed work after the seven-day Lunar New Year, or Tet break.
"If we cannot import more material from China soon, production will cease."
Agriculture will also suffer since China is the largest export market for Vietnamese agriculture, forestry and seafood produce. China accounted for nearly 30 percent of last year’s total exports value in this sector.
The Covid-19 outbreak has resulted in a temporary halt in border trade between both countries following the Tet holiday, leaving hundreds of fruit-carrying container trucks stranded at border gates.
General exports to China in Q1 could fall 5-8 percent year-on-year, or $400-600 million, according to the Ministry of Industry and Trade.
The stock market has experienced turbulence because of the virus, with Vietnam’s benchmark VN-Index plummeting a total 6.39 percent in three consecutive sessions starting January 30 when the market resumed after the holiday.
Back on its feet
But as Prime Minister Nguyen Xuan Phuc has ordered Vietnam’s GDP growth target this year to remain unchanged despite the Covid-19 outbreak, officials and companies are making efforts to boost the economy.
Deputy Minister of Culture, Sports and Tourism Le Quang Tung has urged tour companies to tap other markets showing growth potential like India, boasting a population of nearly 1.37 billion last year.
Tu Quy Thanh, CEO of Lien Bang Travelink, which serves a large number of Chinese tourists, said the Covid-19 outbreak is an opportunity for Vietnamese companies to filter its customers, with Western European and other developed markets perhaps more sustainable.
The Ministry of Culture, Sports and Tourism reopened travel destinations nationwide on February 6, urging travelers to apply necessary safety measures to contain the virus.
Tran Trong Kien, Chairman of the Tourism Advisory Board, proposed the reduction and removal of tax on tourism firms as well as visa fees to attract visitors during this period.
Kien expects the industry to experience a boom in tourism following the disease, similar to what occurred after SARS.
Vietnamese banks have offered lower lending rates to businesses affected by Covid-19 following a State Bank of Vietnam directive.
Mid-sized private lender VPBank will reduce annual lending rates by 1.5 percentage points for around 1,000 of its clients, many of which operate in hospitality, tourism, and transport or conduct direct trade with China.
Private ABBank said it would allocate VND4 trillion ($172.4 million) towards low-interest loans to support businesses affected by the epidemic, with interest discounts up to 3 percentage points for loans above one year.
Border trade resumed on February 6 as PM Phuc cleared the way for fruit trucks to enter China.
The number of confirmed Covid-19 infections in Vietnam has reached 15, the latest being a three-month-old baby.
The global death toll from the epidemic reached 1,115 on Friday, with 1,113 dying in mainland China, one in the Philippines and one in Hong Kong.