Collaboration required to steer towards recovery
Collaboration required to steer towards recovery
The pandemic severely impacted the global economy, with its aftermath becoming far worse than the Great Recession of the 1930s. In September, the Asian Development Bank (ADB) forecast that economies in East Asian nations would contract from 5.4 per cent in 2019 to -0.7 per cent in 2020 if the pandemic was controlled in the third quarter of the year.
By Andrew Jeffries-Country director Asian Development Bank in Vietnam
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According to the ADB, Vietnam is forecast to grow by 1.8 per cent this year before bouncing back to 6.3 per cent next year. Vietnam is showing stronger resilience than most comparable economies in the region, and the economy’s outlook over the medium and long term remains positive.
Vietnam’s positive growth this year and its resilience are largely attributed to the country’s success in containing the COVID-19 pandemic. The effective response to the pandemic is not only an outstanding medical success of the country, but also helps maintain the main drivers of the economy, building stronger foundations for economic recovery.
Thanks to the effective containing of the pandemic, almost all economic assessments and forecasts strongly believe that Vietnam’ economic recovery will follow a positive trend in 2021.
In addition, such an effective response to the pandemic has greatly supported economic activities that will help spur on the domestic economy. Activities in local tourism bounced back in May and June. After some slowdown caused by the return of the pandemic in July, the sector is gradually recovering.
Transport activities witnessed an increase of 2.3 per cent in the volume of passengers in November. Domestic demand continues to be a key driver for maintaining economic growth. Total revenue from retails and consumption services increased 8.5 per cent on-year in November. In the long term, the domestic market with nearly 100 million consumers will make an important contribution to maintaining growth momentum.
Despite the difficulties caused by the pandemic, Vietnam’s exports remain a bright spot, with an impressive trade surplus of nearly $20.1 billion in the first 11 months of 2020. Free trade agreements have been and will become important channels for Vietnam to maximise benefits from the investment and supply chain shifting globally as well as in the region. Along with global strides in researching and producing vaccines, Vietnam’s major trading partners have become adaptive to the ‘new normal’, and external demand, therefore, will gradually recover in 2021, which will benefit for a large open economy like Vietnam.
Despite the COVID-19 pandemic continuing to weigh heavily on health and the economy, increased disbursement of public investment has made significant contribution to maintaining growth momentum. These are great efforts by the government, line-ministries and agencies in managing and accelerating disbursement of public investment, especially in the context that private investment, in particular foreign direct investment, declined by 16.9 per cent year-on-year in the first 11 months of the year. According to the General Statistics Office, disbursement from the state budget in this period reached about VND406.8 trillion ($17.7 billion), up 34 per cent year-on-year.
It would be a pity not to mention the efforts and dynamism of Vietnamese enterprises in overcoming the challenges caused by the pandemic, laying a strong foundation for post-pandemic recovery. Nevertheless, the crisis has seriously hurt Vietnamese businesses, with nearly 93,500 firms forced to suspend their operations in the first 11 months of 2020.
However, global supply chain disruptions have enabled adaptations to a new normal, in which businesses can engage in producing components and products that they used to import for domestic manufacturing. Many firms have quickly shifted to producing healthcare equipment and medical masks for domestic use and export. Strong government support of employers and businesses is warranted in the form of payroll support, unemployment assistance and tax deferral. The State Bank of Vietnam instructed commercial banks to support affected businesses by restructuring debt, lowering interest rates, waiving interest for existing loans.
The Vietnamese government has sought advice from international organisations on solutions for post-pandemic economic recovery and development, including continued promotion of economic restructuring and improving quality of institutions, developing the private sector, improving labour productivity, applying science and technology, and further developing infrastructure.
These are also the areas that the ADB will integrate when preparing the upcoming Country Partnership Strategy 2021-2025 with Vietnam, which is expected to be approved in August 2021.
With the strong foundations, along with unceasing efforts by the Vietnamese government, businesses, and the people, as well as strong support from international partners including the ADB, we are confident that Vietnam will steadily weather the challenges to drive itself on the path toward recovery and prosperity.
