Enhanced Economic Resilience in New Scenario

10:35:34 AM | 28/7/2020

Despite being highly appreciated for effective pandemic prevention, Vietnam still needs to be cautious in assessing the actual situation for the remainder of 2020, and at the same time apply appropriate solutions to promote economic recovery, uphold reforms and ensure social security.

Challenges ahead

According to a report by the Central Institute for Economic Management (CIEM), in the first six months of 2020, Vietnam's economy was in serious difficulty due to the severe impact of Covid-19 pandemic. The GDP growth contracted 3.82% in the first quarter and 0.36% in the second quarter, from the same periods in 2019. The GDP growth was weakened to 1.81% for the first six months, the lowest in 12 years. A decline in economic activity was associated with a decline in investment growth. Total social investment (at current prices) in the second quarter reached VND481.2 trillion (34.8% of GDP), down 7.2 percentage points from the same period of 2019.

According to Mr. Nguyen Anh Duong, Head of Integrated Research Department (CIEM), the data published until June may not fully illustrate the serious impact of the Covid-19 pandemic on the world economy as well as the Vietnamese economy, because governments (including Vietnam) have launched early support measures, and the pandemic has thus far lasted just a short time, resulting in incomplete assessment of its full impacts.

Remarking on opportunities for the Vietnamese economy, he affirmed that the economic difficulty in the last six months of the year is substantial. In 2020, Vietnam's economic growth is forecast to reach 2.6% in the best scenario or 2.1% in the normal scenario.

Vietnam’s economic performance in the second half of 2020 may be affected by factors such as the uncertainty of the world economy, especially the possibility of a second wave of Covid-19 infections. Many economies have separately launched huge support packages without close global coordination, exposing significant risks to the world financial market and global debt. Trade tensions between major economies will likely become more complicated.

Beside the positive effects of EVFTA, Vietnam may face trade remedy lawsuits, tax evasion investigations and origin fraud in some markets.

New normal scenario

Many experts said that Vietnam has an opportunity to make a strong economic recovery as the country has done a good job in realizing the dual goals since the beginning of 2020 and international investors are confident about and keen on Vietnam’s market. However, what Vietnam needs to do next is further improve the macroeconomic foundation and renew the economic mechanism by improving economic resilience and effectively handling risks in the new normal context.

The Central Institute for Economic Management (CIEM) recommended that it is necessary to formulate and implement an economic growth recovery plan with three main pillars: economic restructuring, completion of industrial policies, and FDI attraction. Besides, it is necessary to further improve the business environment, remove difficulties for businesses, develop adaptive skills for businesses and workers, and unlock the potential of new economic models, especially sharing economy and circular economy.

In the new normal scenario, the mindset of reform needs to be changed. The first is “less fear of responsibility", especially in public investment disbursement. The second is “less haste” in monetary fiscal support. The third is “less over-caution” with new issues such as digital economy and electronic money. The fourth is “less fear of no jobs” and new methods needed to adapt to the new context.

Mr. Nguyen Anh Duong, Head of Integrated Research Department, CIEM

Sharing this viewpoint, Prof. Bui Quang Tuan, President of the Vietnam Institute of Economics, affirmed that Vietnam needs to promote and stimulate domestic consumption, consider the effect of worker support package, tax extension policy, resilience to and new opportunities from Covid-19 to develop the digital economy. This is a good opportunity for Vietnam to boost innovation and quickly make breakthroughs in the coming time.

Mr. Phan Duc Hieu, CIEM Vice President, said that business environment reforms are becoming more meaningful. However, much more effort is needed to further improve the business climate. Important legal changes will positively impact business performance and investment attraction.

“With effective enforcement of the amended Law on Enterprises and effective eradication of barriers to administrative procedures or business conditions, it is certain that Vietnamese enterprises have more opportunities to develop,” he emphasized.

According to Dr. Tran Hong Minh, CIEM President, in the last six months of 2020, Vietnam must have plans to rescue businesses in difficult circumstances. Besides its endeavors to contain the Covid-19 pandemic, Vietnam must really embark on reviving the economic foundation based on a three-horse chariot (export, investment and consumption).

By Thu Ha, Vietnam Business Forum