There are possibilities that Vietnam will record negative growth this year as the rising number of community transmission cases undermines growth “motivation”, Nguyen Duc Thanh, former head of the Vietnam Institute for Economic and Policy Research (VEPR) said.
The VEPR had earlier last month forecast a GDP growth of 2.2 percent or 3.8 percent, thanks to rising domestic travel demand after the government eased its social distancing campaign in April.
The forecast, however, has not taken into account a resurgence in Covid-19 cases, especially community transmission. Covid-19 returned to the community on July 25 after more than three months. Since then the country has reported 174 domestic infections.
“If major economic centers in Vietnam are placed under lockdown, a zero growth rate would be a huge success,” Thanh said, adding that VEPR might have to revise its forecast soon.
In fact, he went further, saying GDP growth was no longer a practical target. “We need to figure out how to keep the negative growth to minimum.”
Economist Nguyen Tri Hieu said negative growth was a possibility if major cities like Hanoi and Ho Chi Minh City see a surge in number of cases, with thousands of residents having returned recently from Da Nang, now an outbreak hotspot with 120 cases.
“August will be crucial: if the national tally surges during this month, businesses and services could be shut down and the economy will be severely hit.”
The negative growth will happen as tourism and aviation activities will be restricted again while exports are hit by plummeting orders from major markets, he added.
Vietnam’s economy recorded a decade-low growth of 1.8 percent in the first half this year as the coronavirus pandemic crippled key sectors like tourism, aviation, manufacturing and exports.
The pandemic has robbed 7.8 million workers of their jobs or their working hours, while trade turnover in the first seven months, for the first time in a decade, fell 1.3 percent year-on-year.
How to save the economy in the last half of the year is now the main question, experts said.
Nguyen Xuan Thanh, a lecturer at Fulbright School of Public Policy and Management, said Vietnam has been among the countries with the smallest ratio of Covid-19 financial support to businesses as a ratio of the GDP.
The country has urged banks to support businesses but banks themselves are businesses and they have been reluctant to lend because of the fear of rising bad debt, he added.
This means the government needs to make quicker and more practical decisions on supporting businesses rather than allowing delays in tax payment and cuts which do not have much impact, he said.
Economist Can Van Luc said the government needs to optimize credit guarantee funds for small and medium businesses, which will allow banks to lend more to companies without fear of rising bad debt.
Some experts remain optimistic, though. Tran Tho Dat, president of the National Economics University, said that making forecasts now is a challenging task as there are still many uncertainties.
Vietnam had managed a growth of 0.36 percent in the second quarter despite having restricted many economic activities including aviation, tourism and services in April, he said.
This time, if another social distancing campaign is imposed, Vietnam will have learned from its experience and the pandemic’s impacts could be less severe, he added.
As of Monday morning, Vietnam has recorded 621 Covid -19 cases, including 242 active patients after 373 have recovered.