Economic growth slows as GDP rate threatened

Sticky projected prospects caused by the global health crisis among  Vietnam’s key trading partners are expected to hit the domestic economy this year with the manufacturing and processing sector, one of the key growth pillars, to be hit hardest.

1487p2 economic growth slows as gdp rate threatened

Economic growth slows as GDP rate threatened


“Demand for transporting goods has dramatically plummeted. After many years, this is the first time we foresee a reduction in revenue for a year,” a ITL representative told VIR. “We cannot talk about growth like we do every year, and we are now trying to keep revenue reduction to 20 per cent this year.”Never before has Singapore-invested Indo Trans Logistics Corporation (ITL) faced as great difficulties as it does now. In Vietnam, the coronavirus pandemic has sabotaged the firm’s opportunities to increase revenue and profit at least for this year, with its 200 tractor trailers and 110 trucks operating at 50 per cent capacity compared to normal.

According to a senior official from the Ministry of Planning and Investment (MPI), ITL’s plight is becoming common in Vietnam where local production, especially industrial manufacturing, is badly affected by COVID-19.

“Vietnam’s industrial output has plunged at the fastest speed in six and a half years. The country’s Purchasing Managers’ Index has reduced to below 50 points in February – the first time in four years,” stated an MPI report released last week. “The economy’s index for industrial production in the first quarter of 2020 increased by only 5.8 per cent on-year, far lower than in the same period of 2019 (9.2 per cent), 2018 (12.7 per cent), or 2017 (7.4 per cent).”

The economy is now affected by great and unforeseeable risks, it added. “Thus, it is difficult to reach the growth target of 6.8 per cent this year. COVID-19 has had grave impacts on tourism, transport, and import-export activities. Production and investment activities have and will continue to be hurt. Domestic production activities pertaining to production and supply chains in China, South Korea, Japan, the US, and Europe – all Vietnam’s key trade partners – are expected to continue decreasing due to shortages of materials, labourers, and shrunken demands.”

Last week, Fitch Ratings projected Vietnam’s GDP growth to slow to 3.3 per cent in 2020 on account of COVID-19. This would be the lowest annual growth rate since the mid-1980s.

The Asian Development Bank (ADB) expects Vietnam’s economic growth rate to slow sharply in 2020 to 4.8 per cent from the initial supply shock to economic activity from COVID-19 and the subsequent and ongoing drop in demand from Vietnam’s principal trade and investment partners. The bank forecast that Vietnam’s economy will suffer from a loss of between $675 million and $3.7 billion, or 0.3-1.4 per cent of GDP, and some 750,000 jobs due to the spread of the epidemic.

The biggest sufferers will be the public trade-business and service sector (over $1 billion), the transportation sector ($922 million), and the production-construction sector ($836 million).

The Organisation for Economic Co-operation and Development has also warned that a rise in the outbreak could cause global GDP growth to plummet this year to as little as 1.5 per cent, almost half the 2.9 per cent rate it forecast before the crisis took hold.

Vietnam is quite a large, open economy, with GDP in 2019 of $260 billion and export turnover of $517 billion.

 

Many major economies that have great impacts on the global supply chains and on Vietnam’s economy are expected to suffer from lowered economic growth forecasts this year, such as Europe (0.8 per cent), Japan (0.2 per cent), South Korea (2 per cent), the US (1.9 per cent), and China (4.9 per cent).

Figures from Vietnam’s General Statistics Office showed that last year, these economies accounted for a large part of Vietnam’s exports, including the US ($60.7 billion), Europe ($41.7 billion), China ($41.5 billion), Japan ($20.3 billion), and South Korea ($19.8 billion).

These markets were also the main sources of import goods for Vietnam, including China ($75.3 billion), South Korea ($47.3 billion), Japan ($19.6 billion), Europe ($14.8 billion), and the US ($14.3 billion).

Vietnam’s trade largely depends on China, which purchased 15.75 per cent of the former’s total goods value last year and was responsible for 29.7 per cent of the former’s import value in 2019.

Meanwhile, VinaCapital last week released its report on COVID-19’s economic impact on Vietnam, expecting the pandemic to reduce the country’s GDP growth by 3 percentage points this year to 4 per cent, due to a -1.5 percentage points hit to growth from a 50 per cent drop in tourist arrivals, -1 percentage point from slower manufacturing output growth, and -0.5 percentage points from slower domestic consumption growth. 

Nguyen Chi Dung - Minister of Planning and Investment

Economic growth slows as GDP rate threatened

Currently, it is quite urgent to ensure social security for all people. However, it is also necessary to determine what needs to be done now to have timely policy responses, including the compilation of a new national development scenario which will be implemented after the pandemic ends.

These are big issues to materialise the goals of minimising the aftermath of COVID-19 on the economy and people’s lives, assessing and forecasting new trends in the region and the wider world, and taking advantage of new opportunities and trends in order to prepare solutions and scenarios for rapid and sustainable economic development.

We would need a new mindset and a new positive approach in the context of global economic decline and stagnant production and business, unemployment, and disruption in supply chains and production networks. Economic structures about production, trade, investment, and the world’s order will undergo profound changes.

This is also an opportunity for Vietnam to accelerate its economic restructuring, with the supplementation of new sectors and supply chains so as to strengthen the economy’s resilience against global shocks and pandemic, and also to further perfect the country’s institution and regional and global collaboration mechanisms in tackling such shocks as COVID-19.

It is also a chance for Vietnam to enact sound and timely policies in order to beef up the restructuring of sectors and the whole economy, and invest more in infrastructure, while increasing the economy’s competitiveness so that the country can be strong enough to engage in the world’s new standing after the pandemic ends. VIR

Nguyen Thanh

GDP growth of 3.82 percent in Q1 is a miracle: official

GDP growth of 3.82 percent in Q1 is a miracle: official

Vietnam’s GDP growth rate of 3.82 percent in the first quarter of 2020, a record low since 2011, is still a miracle amidst a global economic recession, an official has said.

Experts examine scenarios for Vietnam's economic growth during COVID-19 outbreak

Experts examine scenarios for Vietnam's economic growth during COVID-19 outbreak

The Government should tax all rice exports instead of issuing quotas to stabilise domestic rice prices during the COVID-19 pandemic.

 
 

Other News

.
Power Development Plan VIII under revision again
Power Development Plan VIII under revision again
BUSINESSicon  13/01/2022 

The draft Power Development Plan VIII is being revised again and expected to be submitted to the Prime Minister for approval in the first quarter of 2022.

M&A in technology booms during pandemic
M&A in technology booms during pandemic
BUSINESSicon  13/01/2022 

The Mergers and Acquisitions (M&A) market in Viet Nam has been going through a downturn due to the pandemic, but the technology sector is bucking the trend.

Auction mechanism for sustainable development of renewable energy market under scrutiny
Auction mechanism for sustainable development of renewable energy market under scrutiny
BUSINESSicon  13/01/2022 

A Policy Dialogue on “Auction Mechanism for Sustainable Development of the Renewable Energy Market” was held via an online format on January 11 by independent think tank Vietnam Initiative for Energy Transition (VIETSE).

Transport Ministry proposes allowing private firms to invest in airport projects
Transport Ministry proposes allowing private firms to invest in airport projects
BUSINESSicon  13/01/2022 

The Ministry of Transport has proposed mobilizing private resources under the public-private partnership model for new airport projects, such as Quang Tri, Sa Pa and Cao Bang.

Trinh Van Quyet’s transaction canceled, securities accounts blocked
Trinh Van Quyet’s transaction canceled, securities accounts blocked
BUSINESSicon  12/01/2022 

An unreported transaction made by Trinh Van Quyet, Chair of FLC Group, worth VND1.6-1.8 trillion on January 10 has been canceled as he did not report the deal.

Tan Hoang Minh Group withdraws from Thu Thiem land auction, accepts loss of deposit
Tan Hoang Minh Group withdraws from Thu Thiem land auction, accepts loss of deposit
FEATUREicon  12/01/2022 

Tan Hoang Minh Group has sent a letter to the Party, State and Government leaders, and HCM City People’s Committee about its decision to withdraw from Thu Thiem land purchase that it won at auction in mid-December.

Land prices soar amid fear for Omicron
Land prices soar amid fear for Omicron
FEATUREicon  13/01/2022 

While affordable apartments are no longer seen in Hanoi and HCM City, apartments priced at hundreds of billions of dong are becoming popular.

Bad debts need to be curbed
Bad debts need to be curbed
BUSINESSicon  13/01/2022 

After the Circular issued by the State Bank of Vietnam on debt restructuring, many bad debts of commercial banks have become non-bad debts because they do not have to change the debt groups.

Vietnam ranks third worldwide in terms of rubber export value
Vietnam ranks third worldwide in terms of rubber export value
BUSINESSicon  12/01/2022 

Vietnam ranked third in the world in terms of rubber export value, with 3.24 billion USD in 2021, up 36.2 percent from the previous year, the Ministry of Agriculture and Rural Development (MARD) said.

China reopens one more border gate with Vietnam for fresh fruit imports
China reopens one more border gate with Vietnam for fresh fruit imports
BUSINESSicon  12/01/2022 

Chinese authority on January 12 re-opened its Hekou International Border Gate for imported fresh fruits, including dragon fruit, and frozen foods from Vietnam, according to the Ministry of Industry and Trade.

Vietnamese banks’ charter capital surged in 2021
Vietnamese banks’ charter capital surged in 2021
BUSINESSicon  12/01/2022 

Banks increased their charter capital by more than VND110 quadrillion in 2021 - the highest annual growth to date - to enhance financial strength and meet the central bank’s regulations.

VN to boost domestic 'supporting industries'
VN to boost domestic 'supporting industries'
BUSINESSicon  12/01/2022 

Vietnam is looking to work closely with foreign firms such as Samsung and Toyota to boost the supply of parts within the country, according to the Ministry of Industry and Trade.

Market potential of elderly service industry growing fast
Market potential of elderly service industry growing fast
BUSINESSicon  13/01/2022 

The increasing demand for services for the elderly has created investment and business opportunities for local and foreign investors.

VIETNAM BUSINESS NEWS JANUARY 12
VIETNAM BUSINESS NEWS JANUARY 12
BUSINESSicon  12/01/2022 

Tra fish exports predicted to hit 1.7 billion USD this year

Vietnam first Southeast Asian country to earn over US$1 billion from exports to Hungary
Vietnam first Southeast Asian country to earn over US$1 billion from exports to Hungary
BUSINESSicon  12/01/2022 

Vietnam has become the first Southeast Asian nation to earn over 1 billion USD from exporting goods to Hungary and the European country’s leading exporter from this region since 2000, according to the Ministry of Industry and Trade.

Vietnam has 683,600 operational firms: economic census
Vietnam has 683,600 operational firms: economic census
BUSINESSicon  12/01/2022 

As of December 31, 2020, Vietnam counted 683,600 operational enterprises, up 35.3 percent from 2016, the 2021 economic census revealed.

Hanoi to welcome launch of 26,000 apartment units in 2022: C&W Vietnam
Hanoi to welcome launch of 26,000 apartment units in 2022: C&W Vietnam
BUSINESSicon  12/01/2022 

Around 26,000 apartment units are expected to be launched in Hanoi in 2022, signaling a vibrant outlook for the segment, according to real estate service provider Cushman & Wakefield (C&W) Vietnam.

Laos top recipient of Vietnam’s overseas investment
Laos top recipient of Vietnam’s overseas investment
BUSINESSicon  12/01/2022 

Laos has been the largest recipient of Vietnam's overseas investment so far, with 209 projects totalling 5.1 billion USD in registered capital, Minister of Planning and Investment Nguyen Chi Dung has said.

Top 5 commodity brokers in Vietnam revealed
Top 5 commodity brokers in Vietnam revealed
BUSINESSicon  12/01/2022 

The five companies holding the largest commodity brokerage market shares in Vietnam sustained their positions in 2021, according to the Mercantile Exchange of Vietnam (MXV).

VN auto market grows slightly in 2021
VN auto market grows slightly in 2021
BUSINESSicon  12/01/2022 

Vietnam’s automobile market recorded slight growth in 2021, data from manufacturers showed.

 
 
 
Leave your comment on an article

OR QUICK LOGIN