Int'l organizations optimistic about Vietnam’s economic recovery
Int'l organizations optimistic about Vietnam’s economic recovery
Vietnam is gradually reopening its doors and adjusting to a “new normal” with post-pandemic recovery plans. Heads of representative offices of international organizations and representatives of foreign business associations in Vietnam are expressing optimism about Vietnam’s economic prospects and recommending ways to accelerate economic recovery.
Francois Painchaud, Resident Representative of the International Monetary Fund (IMF) in Vietnam |
Vietnam’s economy may expand by 6.6 percent in 2022
According to the World Economic Outlook (WEO) database, despite the unpredictable developments of the Covid-19 pandemic, world economic growth will continue to turn in Vietnam’s favor.
Vietnam is showing signs of socioeconomic recovery. Thanks to effective Covid-19 prevention and control measures, especially mass vaccinations, Vietnam’s economy may expand by 6.6 percent in 2022. Enhancing the healthcare capacity plays an important role in economic recovery, in addition to timely fiscal and monetary policies for right groups and appropriate restructuring measures to support long-term development.
Fiscal measures in developed economies can be applied to other countries, including Vietnam. In particular, policy support needs to be based on the developments of the pandemic and the economic development process in each country. Border closure and social distancing measures need to be accompanied by policy support in essential sectors.
Timely support must be provided for the most affected households or firms when a country gradually moves towards reopening. Cash transfers and foregone revenues do not affect Vietnam much in the medium and long term, even if the pandemic continues.
The Covid-19 pandemic has greatly affected employment, especially in the informal sector, vulnerable companies and small- and medium-sized enterprises (SMEs). Therefore, Vietnam needs to adopt temporary liquidity support measures in a timely and right manner, helping businesses avoid disruptions. The country also needs to increase spending on health, vaccinations and subsidies; strengthen public investment and support private investment; improve economic resilience; implement drastic reforms; and maintain macroeconomic stability.
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Mary Tarnowka, Executive Director of the American Chamber of Commerce (AmCham) in Vietnam: |
Businesses plan to expand investment in Vietnam
AmCham Vietnam members are on their way back to trade and production activities and they are optimistic about the future of the Vietnamese market. According to a survey conducted by AmCham Vietnam, most members have returned to operations. For those who have not yet reached their normal capacity, 25 percent are expected to reach full capacity by the end of 2021, over 60 percent hope to return to normal operations in the first quarter of 2022 and more than 90 percent are expected to work at full capacity in the second quarter of 2022. In particular, nearly 80 percent of surveyed members rated positive to very positive the medium- and long-term prospects of the Vietnamese market, and they have planned or are considering expanding investment in Vietnam.
Vietnam’s deployment of Covid-19 vaccinations has allowed many sectors to reopen and recover according to a safe roadmap. More consistent policies across the country on adjustments to safely live with the pandemic will be key to Vietnam’s economic recovery. Liberalizing the requirements related to international travel of foreign experts will facilitate expansion of businesses operating in Vietnam and attract new investment inflows.
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Carolyn Turk, World Bank Country Director for Vietnam |
Adjustments needed to adapt to post-pandemic period
There are four recommendations for Vietnam regarding post-pandemic economic recovery.
Firstly, Vietnam should continue to invest in the healthcare system and accelerate the purchase and distribution of Covid-19 vaccines. In the long term, the country should consider the possibility of rebuilding its healthcare system.
Secondly, Vietnam should consider using both fiscal and monetary policies to rebuild the economy, especially reducing the rigidity in budget allocation. More careful consideration must be given to the current portfolio of investments.
Thirdly, Vietnam should pay attention to efficiency to improve enterprises’ production capacity, while helping businesses invest in new digital technologies.
Fourthly, Vietnam’s economic stimulus packages for enterprises and household businesses remain limited. Vietnam still has much room for increasing its support, but it needs to be transparent and drive towards specific goals.
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Giorgio Aliberti, Head of the EU Delegation to Vietnam |
Vietnam needs to accelerate institutional reforms
Despite the challenges posed by the Covid-19 pandemic, the EU and Vietnam’s business communities and people still benefit from the EU-Vietnam Free Trade Agreement (EVFTA). The trade deal has helped European and Vietnamese exporters overcome difficulties of the global crisis and supply chain disruptions.
Vietnam has seen improvements in its business environment. However, administrative procedures remain a barrier during the implementation process of the trade deal, requiring further improvements. In addition, government efforts are needed to speed up institutional and legal reforms.
To attract EU investment, Vietnam needs to amend regulations on investment attraction because they are outdated. The country also needs to be an industrialized and modernized economy, with legal regulations suited to the market economy and without distinction between domestic businesses and foreign companies regarding taxes and other management mechanisms.
