While the Vietnamese economy has been seriously impacted by COVID-19, it remains resilient and is poised to bounce back, the World Bank said.
Prospects remain positive for both the short and medium terms although the Vietnamese economy suffered from COVID-19 impacts in the first half of this year, according to the latest Taking Stock report, titled ‘What will be the new normal for Vietnam? The economic impact of COVID-19’, released on Thursday.
“If the world situation gradually improves, economic activity should rebound in the second semester of 2020 so that the economy will grow at around 2.8 percent for the entire year, and by 6.8 percent in 2021,” the World Bank said in a press release, quoting the report.
“With less favorable external conditions, the economy will expand by only 1.5 percent in 2020 and 4.5 percent in 2021.”
Finding new drivers of growth to consolidate the expected recovery would be the main challenge for Vietnam.
Continued uncertainties both at home and abroad amid COVID-19 will make it unlikely for the country’s foreign demand and private consumption to return to pre-crisis levels anytime soon.
The coronavirus has caused a surge in inequality, with service sector workers having seen more shrunk income than farmers.
“To adapt to the new normal, policymakers must find new ways to compensate for the weakening of the traditional drivers of growth while managing rising inequality,” said Stefanie Stallmeister, World Bank acting country director for Vietnam.
“However, by being ahead of the curve of the COVID-19 crisis, Vietnam has the unique opportunity to increase its footprint on the global economy and become a leader in tomorrow’s digital world.”
The government should execute existing public investment programs and provide targeted support to the private sector to avoid the COVID-19 economic trap and return to a trajectory of rapid and inclusive growth, said the report, which is a bi-annual economic review of Vietnam.
Vietnam should make sure that resources are directed to those projects with the biggest positive impact on its economy and jobs, while minimizing technical and financial losses during implementation.
The Southeast Asian nation can develop strategic cooperation with countries that have a low rate of COVID-19 infections and boost promotion efforts so as to attract companies planning on supply chain diversification.
The global health crisis presents a unique opportunity for a contactless economy, spurring digital payment, e-learning, telemedicine, and digital data, which will help respond to the fast-expanding demand for quality services by the middle-class in the country.