Assessing the impact of the Covid-19 epidemic on the Vietnamese economy

Overview of the Covid-19 epidemic

In late December 2019, the 2019 novel coronavirus emerged from Wuhan, China, and resulted in a formidable outbreak in many cities in China and expanded globally. As of 9 am on 21/2/2020, there have been 76723 cases worldwide, with 2247 deaths, according to WHO.

Vietnam currently has 16 cases of infection, of which 15 people have recovered, no deaths have been recorded. Previously, Vietnam was assessed by health organizations to be at high risk of the Covid-19 epidemic due to sharing a border with China and the large volume of economic, trade, and tourism transactions between the two countries. At the same time, the weather conditions are quite similar. However, thanks to the prompt and effective policies and measures of the Vietnamese Communist Party and the Government, Vietnam has good control of the Covid-19 epidemic.

Assessing the impact of Covid-19 on Vietnam's economy

Several recent studies of organizations in the world such as Goldman Sachs, Moody's, Coface, BNP Paribas Cadif, International SOS ... suppose that the Covid-19 disease could cause global GDP to drop by around 0.3-0.7 percentage points in 2020, depending on the situation of disease control. Meanwhile, according to the Vietnamese Ministry of Planning and Investment's estimation, Vietnam's growth rate in the case of epidemic control during the first quarter of 2020 and the second quarter of 2020 is forecasted to be 6.25% and 5,96%, decrease 0.55 and 0.84 percentage points, respectively, compared to the Government's Resolution 01 / NQ-CP.

For the foreign trade sector, in the first quarter, total import-export turnover is forecasted to decrease by 19-25%, compared to the same period last year (exports decreased by 19-20% and imports decreased by about 25%). Similarly, in the second quarter, the export reduction was about 15-16%, and imports fell by about 20%. By the second half of the year, import and export forecast is expected to recover with the positive progress of the disease. For the whole year, exports decreased by about 10%, and imports declined by about 11%.

China is one of Vietnam's most important trading partners, the largest import market (accounting for 27.6% of Vietnam's total import turnover), and the second-largest export market (accounting for 15.7% of total exports). However, trade between Vietnam and China in quarters 1 and 2/ 2020 will be affected as China is restricting customs clearance, strengthening management, and tightening border gates as a measure to prevent the spread of Covid-19.

Therefore, items that account for a large proportion of total exports to China, such as agriculture - fisheries (20%), are likely to have many difficulties. Besides, some key manufacturing and export industries of Vietnam, which depend heavily on input materials from China, also suffered negative impacts (especially in quarters 1 and 2/ 2020) due to lack of input materials, supply chain disruptions (while inventory and alternative sources are limited). Specifically, China is a major partner of Vietnam in the supply of textiles, footwear (accounting for 47.74% of total imports), chemicals and chemical products (30.6%), plastic materials, and plastic products (25.7%). Therefore, industries that need to use these materials are most affected.

The Government's solutions to support enterprises

In order to ensure the growth targets, the Government has also issued policies to support businesses. Specifically, under the direction of the State Bank of Vietnam, many banks implemented preferential credit packages, reduced lending rates, and rescheduled loans to businesses facing difficulties in the outbreak of Covid-19. In addition, the Vietnamese Ministry of Finance also has tax policies to support small and medium-sized businesses, cutting input costs for firms such as reducing electricity and water charges ... Moreover, the Government and ministries and agencies are also research solutions to restructure economic after the end of Covid-19 epidemic.

It is still quite early to assess fully and accurately the impact of the Covid-19 epidemic on Vietnam's economy and the world. In order to minimize adverse effects on society and economy, authorities, businesses, and communities should continuously update and coordinate to respond promptly to new developments of the Covid-19.

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