Vietnam’s economy is predicted to grow by 3 percent this year, the lowest growth rate in many years, according to The Aftershock, a report just released by Standard Chartered.

The 3 percent growth rate is 0.3 percent lower than the growth rate also predicted by Standard Chartered three months before. Domestic economic activities have resumed, but Vietnam’s economy still bears negative impact from outside.

Vietnam has joined more deeply into the global economy with the ratio of trade to GDP among the highest in Asia, which shows Vietnam’s heavy reliance on world demand.

Therefore, as the US, the Euro-zone economies and G10 have fallen into recession because of Covid-19, bringing about a sharp fall in demand, the impact on Vietnam’s economy is certain.

Chang Yong Rhee from IMF affirmed that Asian economies won’t be able to grow if the whole world is still struggling with Covid-19, since the region heavily relies on the global supply chain.

However, even if Vietnam grows by 3 percent only this year, this would still be satisfactory, if noting that IMF predicts a minus (-) 0.8 percent growth rate for emerging and developing economies in Asia, and a minus (-) 2 percent growth rate for ASEAN-5, or the five largest economies in Southeast Asia.

According to the Vietnam Institute for Economic and Policy Research (VEPR), Vietnam was one of a few economies in the world which obtained a positive GDP growth rate in Q2 (0.36 percent), while the CPI decreased because of the petroleum price decreases.

According to the Vietnam Institute for Economic and Policy Research (VEPR), Vietnam was one of a few economies in the world which obtained a positive GDP growth rate in Q2 (0.36 percent), while the CPI decreased because of the petroleum price decreases.

Chidu Narayanan from Standard Chartered believes that Vietnam’s economy will recover in the second half of the year, with the major driving force coming from the inner strength of the economy, but warned that challenges from the world’s economy will partially slow down growth.

He explained that Vietnam ranks second in ASEAN, just after Singapore, in terms of reliance on the global economy, and its ratio of trade to GDP is at 198 percent, with electronic exports accounting for a large proportion.

The latest macroeconomy report shows that the production and service sector will continue recovering, thus helping fostering growth in the second half of the year.

The production sector is expected to obtain 1.5 percent growth rate in 2020 and contribute to the general growth rate decreasing by 1.8 percentage point. Meanwhile, the contribution to GDP by the service sector is predicted to decrease from 2.8 percentage points in 2019 to 0.5 percentage point.

VEPR has drawn up two scenarios for Vietnam’s economic growth – 3.8 percent in the best scenario and 2.2 percent for the worst scenario.

Le Ha 

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