HCM City has imposed social distancing

Vo Tri Thanh, a respected economist, thinks that the current situation may last a long time and the virus will spread to other provinces.

“It’s necessary to anticipate bad scenarios, so that we can know how to deal with the worst if it comes, and mobilize resources in the most timely and effective way, so as to avoid the perplexity as we are facing in HCM City,” he said.

Scenarios

The worst scenario, according to Thanh, is that the GDP growth rate is just 5 percent this year.

Thanh, an optimist, is very cautious this time.

Under Scenario 1 drawn up by the Government, the targeted growth rate is 6 percent in 2021, if the pandemic is basically controlled in July, there are no hotbeds in Industrial Zones and key economic centers, and no social distancing.

Vietnam needs to obtain a growth rate of 6.2 percent in Q3, or 0.5 percentage point lower than that shown in Resolution 01, and 6.5 percent in Q4, or 0.2 percentage point lower.

Under Scenario 2, the targeted growth rate is 6.5 percent, provided that Covid-19 is controlled in June, with no hotbed in IZs and no social distancing in cities/provinces. The growth rate needs to be 7 percent in Q3, higher by 0.3 percentage point, and 7.5 percent in Q4, higher by 0.8 percentage point.

The Government in late June affirmed that the growth rate targets had not been changed.

Nevertheless, Tran Thi Hong Minh, Head of the Central Institute of Economic Managemet (CIEM), commented that realizing the target of GDP growth rate of 6.5 percent this year is a great challenge, though Vietnam obtained a high growth rate of 5.64 percent in H1.

In ‘Vietnam’s Economy in H1 2021 – Reform to Restore Sustainable Growth’ report, CIEM shows two economic development scenarios.

In Scenario 1, the pandemic is controlled by October, thus paving the way for resumption of production and economic activities at a normal level.

Scenario 2 is designed with conditions nearly the same as Scenario 1, but the difference is that the pandemic is contained soon, by August. The presumed GDP growth rate of the world, money supply, credit and disbursement of public investment capital are higher.

GDP growth rates could be 5.9 percent with Scenario 1 and 6.2 percent with Scenario 2. The yearly export turnover is predicted to increase by 16.4 percent and 18.3 percent, respectively, while trade surplus at $4.2 billion and $5.4 billion, and inflation rates 2.6 percent and 2.8 percent, respectively.

The report pointed out that the capability of controlling the pandemic would be an important factor that determines growth rates in the last months of the year.

The Covid-19 outbreak in HCM City and neighboring provinces is threatening the livelihoods of people and disrupting production and business chains.

Also, economic growth would be affected by public investment disbursement, macroeconomic stability, digital economy support and digital transformation, the ability to take full advantage of FTAs (free trade agreeements), and ensuring opportunities for women workers.

Accelerating reform

Amid the challenges, Minh said Vietnam needs to promote reform to restore growth sustainably, with focus on three things.

First, ensuring parallel macroeconomic policies and microeconomic reform, striving for green and sustainable recovery.

Second, accelerating the recovery of business and heightening internal capability and the autonomy of the economy in association with effective implementation of the international economic integration process.

Third, encouraging innovation, developing science and technology towards digital economy; equipping with new skills to improve productivity.

Economists stressed that in order to obtain sustainable economic development, settling businesses’ difficulties and speeding up public investment disbursement also need the Government’s special attention from now until the end of the year.

Nguyen Anh Duong from CIEM added the driving force for reform is promoting digital economy and digital transformation. Other countries can rise up after the pandemic thanks to digital economy.

Vietnam needs to consider trends in digital economy around the world, e-commerce development trends, and cross-border data movement. 

Lan Anh

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