For the first time since early this year, Prime Minister Nguyen Xuan Phuc asked the Ministry of Planning and Investment (MPI) to devise new scenarios for economic growth until the year’s end, with efforts to be made to maintain “positive growth”. The move comes in the context that almost all nations worldwide are expected to suffer from negative growth this year.
In Vietnam, five out of 12 key socioeconomic goals are forecast to be out of reach as compared to initial plans (see box) for 2020. Under the latest scenarios being drafted by the MPI, the economy may grow 1.69 per cent (downside scenario) and 2.12 per cent (positive scenario). Whatever scenario will come true, Vietnam is expected to be among one of the few nations in the world to achieve a positive growth rate for the year.
The economy grew 3.68 per cent in the first quarter of the year, 0.36 per cent in the second quarter, and 1.81 per cent across those first six months. The MPI predicted that the rate will be 1.04 per cent (downside scenario) and 1.69 per cent (positive scenario) in the third quarter; 1.51 per cent (downside scenario) and 1.76 per cent (positive scenario) in the nine months; and 2.06 per cent (downside scenario) and 2.86 per cent (positive scenario) in the fourth quarter.
The MPI reported to the government that in 2020, the GDP scale may be VND6.3 quadrillion ($273.9 billion), up by VND264 trillion ($11.48 billion) on-year.
“The government is implementing a dual target, which is to fight against the pandemic and take advantage of opportunities to boost and recover economic activities,” stated MPI Minister Nguyen Chi Dung. “Efforts are to be maximised to accomplish all socioeconomic development goals and tasks for 2020, including a growth rate of about 2 per cent. If there will be more favourable conditions, efforts must be made to reach a growth rate of 2.5 per cent.”
However, the minister also noted that without more drastic monetary and fiscal as well as social security solutions, it may be very difficult for the economy to maintain positive economic growth this year.
According to the MPI, a 1 per cent economic growth rate can help create employment for at least 400,000 people.
One of the reasons behind such forecasts is that in the months to come, it is expected that the domestic economy will continue facing numerous difficulties including suffering the effects of a global economic downturn, especially in the economies that are Vietnam’s key trade and investment partners. The resurgence of COVID-19 continues to seriously sabotage almost all sectors in the economy, especially tourism, transport, and export-import activities.
According to the International Monetary Fund (IMF), the grave aftermath caused by the pandemic is expected to drive many major economies to below-zero or near-zero growth in 2020 and 2021, such as the global economy (-1.9 and -0.4 per cent), the United States (-1.9 and 0.3 per cent), Japan (-0.6 and -0.6 per cent), the United Kingdom (-3.7 and 2.3 per cent), the eurozone (-2.7 and 1.3 per cent), China (-0.2 and -1), India (-6.4 and -1.4 per cent), South Korea (-2.1 per cent), and Singapore (-3.5 per cent).
“All these economies’ below-zero growth will negatively affect Vietnam’s economic growth in 2020 as Vietnam attracted a big volume of foreign direct investment (FDI) from many these markets. They are also Vietnam’s big export markets,” said Tran Thi Hong Minh, director of the Central Institute for Economic Management.
Figures from the MPI demonstrated that as of August 20, Vietnam attracted $90.74 billion in registered capital from ASEAN including $55 billion from Singapore; $70.16 billion from South Korea; $60.26 billion from Japan; over $24 billion from the eurozone; $21.13 billion from China; $9.34 billion from the US; $3.6 billion from the UK; and $889.6 million from India. These markets hold 73.5 per cent of Vietnam’s total registered FDI of $381.1 billion. In Vietnam, FDI generated more than 20 per cent of economic growth by late last year.
Vietnam’s economic growth is expected to slow notably this year on weaker exports and fewer tourist arrivals. Figures from the General Statistics Office showed that in the first eight months of 2020, Vietnam’s total export turnover hit $174.1 billion, up only 1.6 per cent against the same period last year, when the increase level was 7.3 per cent on-year. Total revenue from travel services hit VND13.1 trillion ($569.5 million), down 54.4 per cent as compared to the corresponding period last year, when such services enjoyed an on-year 10 per cent rise in revenue.
According to the World Bank, assuming a gradual improvement in the world economy, the economy will grow around 2.8 per cent for the entire year. With less favourable external conditions, the rate will be 1.5 per cent.
“Regardless of scenario, Vietnam is expected to remain one of the fastest-growing economies in the world in 2020. This projected performance means that Vietnam would be the fifth fastest growing country in the world in 2020,” said Stefanie Stallmeister, acting country director of the World Bank in Vietnam.