"Perhaps this is a turning point when Vietnam leaves the group of countries such as Cambodia and the Philippines and joins the more advanced countries such as Thailand and South Korea, even though Vietnam does not yet have the equivalent GDP."
Deutsche Welle (DW) reported: "Despite the global economic crisis and the risk of recession in some neighboring countries, Vietnam has set a target of 5% economic growth this year. This ambitious goal was announced by Prime Minister Nguyen Xuan Phuc in a recent online conference with thousands of representatives domestically and internationally.”
This goal is noticeably higher than the 2.7% estimation of IMF. Even though this estimation is 7% lower than that in 2019, Vietnam is still expected to achieve higher growth than neighboring countries.
The Government hopes the economy will be benefited from the successful war against COVID-19. Until now, Vietnam has recorded 324 cases without any death.
Vietnam has not had a public infection for weeks. The recent cases were Vietnamese returning to the country from other nations where the virus outbreak is of extreme seriousness.
Experts believe that the fact that Vietnam is able to fight against the virus is because this nation has had quick and definitive responses. A clear example of this is the fact that Hanoi decided to close schools, border gates, and suspend international tourism sooner than in other countries. Vietnam has also set up camps where foreign tourists would be quarantined in 14 days after their arrivals.
Despite the extreme methods, Vietnam has received worldwide compliments when it comes to pandemic handling. With the economy being restarted, Hanoi hopes to use this newly-achieved to attract foreign investors and enterprises.
Adam McCarty, the Chief Economist of Mekong Economic Research and Consulting, expects that Vietnam will benefit from its successful responses to Covid-19. "Perhaps this is a turning point when Vietnam leaves the group of countries such as Cambodia and the Philippines and joins the more advanced countries such as Thailand and South Korea, even though Vietnam does not yet have the equivalent GDP."
This economist commented: “Vietnam is showing that it can handle the situation much better than most nations in Europe and the US. This is a signal for foreign investors and governments.”
Vietnam is expected to continue its trend which started some years ago. After the trade tensions between the US and China began to increase, a number of companies have shifted production from China to Vietnam. With relatively cheap labor, a young population, and a relatively open investment environment, Vietnam is often seen as a good alternative to mass production in China.
Vu Minh Khuong, an associate professor at the National University of Singapore, said that the Vietnamese government's goal was "ambitious but not realistic". Khuong told DW that he expected more foreign investment and reallocation from China. Moreover, COVID-19 has strengthened Vietnam's social connectivity and digitalization, he said. "Thanks to the pandemic, Vietnam has made great leaps in digital transformation. The rate of online transactions in public services increased from 12% to 24% during the social separation period." Khuong also expects large government investment and private consumption to boost the economy.
>> Vietnam suffered a trade deficit of $1 billion in the first half of May
However, even if Vietnam is expected to outperform other countries in the region - such as Thailand, whose economy is forecast to shrink by 6% - it will not escape the crisis.
In the first quarter of this year, nearly 35,000 businesses were shut down, based on a VCCI survey. Vietnam's economy grew by 3.8% in the first quarter, which has been the lowest figure in 11 years.
Industries such as tourism and export-related ones are having a particularly difficult time. Foreign tourists no longer appear at popular destinations such as Ha Long Bay and Hoi An after Vietnam closed its border and all international flights. Garment factories have witnessed a sharp decline in orders because of the demand for clothing and shoes plummeted.
"Because the rest of the world is still struggling with Covid-19, exports will indeed be negatively affected," McCarty said. The economist emphasizes that things will not return to the way they were.