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Long-lasting impacts of Covid-19 on Vietnam's economic development

Long-lasting impacts of Covid-19 on Vietnam's economic development

Monday 25, 01 2021
Vietnam's economic growth in 2020 is 2.91%, and the target for 2021 is 6.5%. The Vietnamese economy is proving its extraordinary resilience to the “upheaval”. However, many challenges are still awaiting on the journey of recovery and development.

The Asia-Pacific region is expected to enjoy a growth rate of 7.4% in 2021 thanks to the rebound of countries that have been through a gloomy time. However, according to the World Bank (WB), the growth rate may reach just over 5.4% if the epidemic is not really under good control.

The Asia-Pacific region

Good pandemic control, resumption of import and export activities, and increased efficiency of public investment disbursement are the factors responsible for Vietnam's 2.91% growth in 2020. Although Vietnam’s 2020 GDP growth rate is the lowest since 2010, it is the evidence for "the most successful year in the 5 most recent years (2016 - 2020)", according to the Prime Minister.

The World Bank said that Vietnam was extremely successful in controlling Covid-19 with "modest cost in terms of both human and economy". According to the World Economic Outlook report of this organization, Vietnam's economy is forecast to grow by 6.7% in 2021. HSCB is also optimistic about the most dynamic country in the Asia - Pacific region when giving a forecast for growth of 7.6%.

However, the impact of the Covid-19 epidemic on the Vietnamese economy is inevitable and many consequences are believed to arise in the future.

Existing risks

The WB report stated that after the pandemic, Vietnamese people will continue to save money and limit their consumption. Anxiety and fear will also continue to hamper services such as tourism, accommodation, and airlines.

Declining productivity due to falling investment, and “eroding” human resources due to high unemployment rate are also negative long-term effects of Covid-19.

From an international perspective, the epidemic is still developing complicatedly in many countries around the world, including important trade and investment partners of Vietnam. Experts commented that Vietnam's economic recovery potential will be severely hurt if the pandemic is still spreading and the distribution of vaccines does not reach the expected efficiency and progress.
Existing risks

In fact, despite being well controlled, there is still a high possibility of a pandemic outbreak at any time until the vaccine is widely distributed. SSI Center for Analysis and Investment Advisory also stated that "any event related to testing, deploying, accepting a vaccine or variant of the virus may have a strong impact on the recovery momentum".

In addition, many experts also warned about the risk of lowering national credit rating, increasing level of public debt, and high risk of inflation if the fiscal and monetary policies supporting the economy are implemented ineffectively.
The above risks and challenges, coupled with volatile international relations, can damage the 2021 recovery process as well as long-term development.

Resilient to breakthrough

World Bank experts commented that Vietnam's successes in 2020 have partly demonstrated its "resilience despite global turbulence". Macro stability and public investment disbursement will continue to be important factors in economic development in 2021.

In terms of foreign trade, Vietnam’s economy will receive many benefits from the new-generation free trade agreements. Along with that, attracting foreign direct investment (FDI) is also expected to grow strongly in the coming time.

According to World Bank experts, Vietnam should continue to maintain its "dual goals", both recovering economy and ensuring effective epidemic control. Vaccine research and development should be set as a top target in the short term.
Resilient to break through

In the medium and long term, fiscal and monetary policies need to be carefully reviewed to ensure their effectiveness to avoid budget overspending. Many domestic experts have also stated that the supporting policies need to be implemented selectively to support businesses with development potential.

Along with that, improving the business environment, transforming the economic structure towards sustainability, reducing emissions, preventing and responding to climate change will continue to be important factors for the development of Vietnam in the new era.

Source: theleader


Vietnam Economy

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