|Landmark 81 in HCM City - the tallest building in Southeast Asia. Vietnam has been described as a rising star amid the pandemic by the World Bank who rank the country fifth fastest growing economy in the world. — VNA/VNS Photo Anh Tuan
World Bank Lead Economist and Program Leader for Vietnam Jacques Morisset said “Vietnam has a chance to spend more and spend better to boost local production at this time,” during an online meeting held by the World Bank on July 30 to discuss the 'new normal' for Vietnam.
He said while the fiscal accounts have deteriorated due to lower revenue, the government was able to absorb the shock, thanks to the accumulation of reserves and the use of contingent funds, limiting the use of new borrowing.
Though the local economy has nonetheless been hit by the COVID-19 crisis, with the GDP growth rate of 1.8 %, the breakdown by sectors indicates that the agro-forestry-fisheries sector recorded a growth rate of 1.2 % and contributed 11.9 % to the overall economic growth, the industrial sector expanded by 3 % (73.1 % of GDP), while the services sector grew by only 0.6 % (15 % of GDP).
The latest report by the World Bank (WB) said while COVID-19 has spread around the planet, killing hundreds of thousands of people and sending billions into lock-down, as health services struggle to cope, Vietnam still belongs to a small club of countries that have reported zero deaths caused by the pandemic. This result is even more impressive considering the country is located next to China as the epicentre of the pandemic.
The bank’s director Stefanie Stallmeister said that saving human lives was more important than saving jobs. Several economic and financial indicators have not yet bounced back to their pre-crisis levels, including the gross domestic product (GDP) growth rate that, at 1.8 % in the first quarter of 2020, was approximately 5 percentage points lower than its historical trajectory in recent years.
Morisset said: “Vietnam has a unique opportunity to increase its footprint in the world economy and to push ahead with its agenda of reforms so it can accelerate its quest to become a high-income economy in the foreseeable future.”
The bank saw the local GDP continue to expand during the first six months of 2020, albeit at a slower pace than in the recent past while inflation has been contained despite the easing of monetary conditions by the State Bank of Vietnam, which has led to the expansion of credit by commercial banks to businesses.
The bank representative also said Vietnam has coped with the impact of COVID-19 on its external accounts by maintaining a trade surplus and attracting a relatively large amount of foreign direct investment (FDI) inflows even though exports have contracted in recent months.
Morisset said as many of the local businesses were home based with family-member employees, household businesses could recover quite quickly after social distancing.
However, he said Vietnam should do more to cope with the new situation, saying: “No one knows what will happen in the few weeks.”
Over the weekend, as more COVID-19 cases were reported and another wave of social distancing could be applied, the bank said tourism and remittances could be further impacted.
As governmental data indicates that as many as 30 million workers, or more than half of the labour force, could have been affected by the crisis, the bank said the country should prepare to retrain its workers.
The report said the impact of the crisis has also not been uniform, raising inequalities across sectors and among people.
As about 90 % of the population has a smartphone and a good foundation of digital infrastructure, the World Bank’s representative said: “Vietnam can take the chance to boost contact-free services and e-commerce.”
According to the report, the ongoing transformation of the global economy provides the opportunity for Vietnam to take important policy actions.
WB estimated that the local GDP should rebound in the second quarter of 2020 so that the economy will grow at around 2.8 % for the entire year. It should further expand by 6.8 % in 2021 (baseline scenario). With less favourable external conditions, the economy will expand by only 1.5 % in 2020 and 4.5 % in 2021 (downside scenario).
The report also said: “Regardless of the scenario, Vietnam is expected to remain one of the fastest-growing economies in the world in 2020."