Urgently Making Economic Recovery Scenarios

10:39:18 AM | 4/20/2020

In addition to applying urgent solutions to clear hurdles against businesses, it is extremely important and necessary to increase public investment, ensure social security and work out scenarios and solutions to revive the economy as soon as the pandemic is over.

This was also one of Prime Minister Nguyen Xuan Phuc’s important directions at the online cabinet meeting with localities on urgent tasks and solutions to overcome business difficulties, promote public investment disbursement, support workers and ensure social security, order and safety amidst the Covid-19 epidemic. This “All-in-One” conference was designed to mobilize resources to overcome the epidemic and create momentum for social and economic recovery and development.

According to Minister of Planning and Investment Nguyen Chi Dung, the Covid-19 pandemic has wide-ranging impact on all economic and social fields of countries in the world. In Vietnam, the target of 6.8% GDP growth is extremely challenging and can hardly be achieved. In case the plague is controlled in the second quarter, the country’s GDP growth is forecast at 5.32%. If it lasts till the third quarter, the rate is forecast at 5.05%.

To solve difficulties caused by Covid-19, in the past time, the Government has launched many timely solutions to support businesses and ensure social security. Among them are Directive 11/CT-TTg dated March 4, 2020 with seven groups of specific tasks and solutions, targeting those businesses and laid-off workers. Besides, support measures include monetary support package of about VND300 trillion (US$12.8 billion), financial support package of about VND180 trillion (US$7.7 billion), social security support package of over VND62 trillion (US$2.6 billion), power tariff support package of VND12 trillion ( US$512 million), and telecom tariff support package  of VND15 trillion (US$640 million). Most recently the Government issued Decree 41/2020/ND-CP dated April 7, 2020, on extended deadline for payment of value added tax, corporate income tax, personal income tax and land rent to those affected by Covid-19. These urgent solutions have been producing positive effects and laying the foundation for early social and economic recovery.

However, according to economic experts, in addition to timely policy responses, it is necessary to prepare for "post-Covid-19" scenarios rather than just waiting for the end of the plague to do it. Different scenarios from short to long term must be prepared also, with common factors of the world and the country taken into account. Besides, the scenarios must also be specific to each industry, field, locality and business. This will help Vietnam take advantage of every opportunity to develop rapidly and sustainably.

At this online meeting, the Prime Minister assigned the Ministry of Planning and Investment to "urgently develop scenarios to quickly revive the economy". Previously, the ministry also actively prepared initial steps to work out this scenario, including mechanisms and policies for implementation in all three phases: during and after the pandemic.

Regarding economic development scenarios, the National Economics University also studied and forecast the impact of the pandemic on several economic sectors. Under Scenario 1 (the epidemic lasts until the end of April), merchandise trade sectors will fall by 20-30%; hospitality and hotel sectors down by 15-20% in domestic and international visitors, a revenue by 20%, and unemployment by 15-20%; agriculture sectors by 2.8-27.4%. In the scenario in which the epidemic will last until the end of June, commodity trade sectors will decline by 30-40%; transport and logistics sectors by 20-30%; hospitality and hotel sectors by 30-40% in domestic and international visitors, a revenue by 40%, and unemployment by 30-40%.

Most recently, Dr. Can Van Luc and authors from the BIDV Training and Research Institute also updated the Vietnam economic growth scenario in 2020 amid the Covid-19 pandemic (released on April 10, 2020), which presented three growth scenarios. Under the baseline scenario (the epidemic in Vietnam is controlled in the second quarter of 2020), the GDP in 2020 will decrease by 1.8-2 percentage points to a growth rate of 4.81-5.01%. In the positive scenario (Covid-19 is under control in April 2020 or mid-May 2020, and manufacturing - business activities will be resumed immediately after that), Vietnam's GDP growth will decrease by 1.4 percentage points to 5.4-5.6% in 2020. In the negative scenario, the plague is controlled in the second quarter but external supply and demand are negatively affected, Vietnam's GDP growth will slip 2.58 percentage points to 4.07-4.42% in 2020.

Assessing the impact of the pandemic on sectors and fields and forecasting these trends and opportunities will make Vietnam proactively ready to face any situation without being left outside or behind on the new playground that will form after the epidemic. And even though studies show different scenarios, they share one thing in common: If the pandemic is not controlled quickly, there will be more negative effects on the economy and other aspects of social life.

By Ha Thu, Vietnam Business Forum