In its latest Vietnam Macro Monitoring report, the WB said, looking ahead, special attention should be paid to how the COVID-19 vaccinations will be rolled out domestically and globally as they will impact the pace of Vietnam’s economic growth. Further fiscal and monetary policy interventions may be needed to support recovery of private demand.
According the WB, the Vietnamese government quickly introduced strict but targeted measures to suppress this new outbreak of COVID-19 in Hai Duong, the epicenter, including during the Tet holidays.
As a result, the number of new cases started decreasing, and restrictions were partly eased in the second half of the month.
In the meantime, Vietnam has approved three types of vaccines. The government also approved a resolution to purchase a total of about 150 million doses of COVID-19 vaccines, and prioritized recipient groups.
The WB noted that industrial production slowed as factories closed in observance of the Tet holidays. Industrial production index dropped by 7.2 percent year-on-year in February 2021. This decline is mainly reflecting the cross-year difference in the timing of the Tet holidays, when factories shut down for a week. The two-month moving average still registered an increase of 8.8 percent year-on-year in the first two months of 2021. Metals production, and electronics, computers and optical products continued to grow by 8.6 percent and 3.2 percent, respectively in February, thanks to strong external demand.
Despite the new COVID-19 outbreak, retail sales in February grew by 0.3 percent month-on-month and by 8.3 percent year-on-year due to higher consumption demand associated with the Tet holidays. While lower than pre-COVID-19 performance, this growth suggests that the government’s targeted response to the outbreak mitigated the spillover of the negative impacts of anti-COVID stringency measures on economic activities to provinces outside the epicenter.
Vietnam’s merchandise exports fell by 4.2 percent year-on-year while imports grew by 11.8 percent year-on-year in February 2021, resulting in the first month of trade deficit since April 2020.
Preliminary data show that exports to the US and China rose while those to EU, ASEAN, the Republic of Korea, and Japan decreased. The increase in imports was driven by a doubling of imports from China in February 2021 compared to the same period last year, mirroring January 2021 import patterns. In January 2021, imports of phones, computers, electronics and their parts, and machinery accounted for half of total imports from China and grew by over 75 percent year-on-year. This reflects both Vietnam’s heavy reliance on imported inputs in manufacturing.
In the first two month of 2021, the Vietnamese government collected 286.7 trillion VND of revenues, which is 0.6 percent higher than the same period last year. This good performance – the first time that government total revenue is increasing since the beginning of the COVID-19 crisis a year ago reflects the ongoing recovery and the elimination of most tax incentives that were adopted in April 2020.
The Ministry of Finance proposal for a second round of tax and land rental deferrals is being discussed by the cabinet. The total size of the package was estimated at 115 trillion VND (5 billion USD). If approved and implemented well, it is expected to help businesses and households maintain their economic activities, particularly in tourism, which remains depressed.
Experts have been optimistic about Vietnam’s economic growth in 2021 based on the latest situation, as well as the sound decisions and policies adopted by the Party and Government.
As the global economy is still mostly struggling with the health crisis, the start in 2021 is overshadowed by the hurdles of the previous year. Nevertheless, Vietnam may regain traction in economic growth.