Vietnam's economy to rebound soon

Le Trung Hieu, general director of the System of National Accounts Department

Vietnam’s GDP growth in the third quarter and in the first nine months was far below expectations because many localities have placed pandemic containment over economic development. Many countries have resigned to coexist with the pandemic – is it time for Vietnam to change its "pandemic-fighting" concept to reach the dual targets?

In the first nine months, we have focused almost all of our resources on pandemic containment and dealing with the consequences, leading to perfunctory economic performance and supply chain disruptions. The healthcare system is being overloaded, while the population's morale was sapped.

However, it is impossible to continue our routine of tracing-zoning-lockdown-quarantine as it will only drain the will of the people and the strength of the economy. Businesses and economic entities have also been struggling to maintain production amidst the hardships.

It is therefore important to change our mindset to coexist with the pandemic, the way other countries have done. The government is adjusting its pandemic containment policy, shifting from our passive stance into actively attacking by rolling out COVID-19 vaccination to quickly reach community immunity.

The local economy contracted in the third quarter this year and expanded by only 1.42 per cent in the first nine months. This was far below even the worst-case development scenarios forecast by international financial institutions. How do you see this performance?

Never before has it been so difficult to make an economic development forecast. Forecasts and the actual performance have been vastly divergent since the emergence of the pandemic.

The Asian Development Bank (ADB), International Monetary Fund (IMF), and the World Bank have all significantly reduced their earlier forecasts for Vietnam’s economic growth for the third quarter of 2021.

Particularly, in its August 2021 report, the World Bank forecast Vietnam’s economy to expand by about 4.8 per cent in 2021, 1.8 percentage points lower than the forecast made two months earlier. It has maintained its growth forecast for 2022 intact at 6.5-7 per cent, however.

Meanwhile, the ADB has sharply reduced Vietnam’s growth forecast in 2021 from 6.7 to just 3.8 per cent, but kept the country’s 2022 forecast unchanged at 7 per cent. It forecast Vietnam's economic growth to be the fourth highest in the ASEAN bloc in 2021, behind Singapore (up 6.5 per cent), Malaysia (4.7 per cent), and the Philippines (4.5 per cent).

However, while the pandemic situation is gradually brought under control in Vietnam, it is intensifying in Singapore and Malaysia with a sharp rise in infections.

Thus, even in case Vietnam cannot reach the 4.8 per cent growth forecast by the World Bank or the 3.8 per cent by ADB, the country is still one of the fastest-growing ASEAN members.

What makes you so optimistic?

Although they have lowered Vietnam's growth forecast, policymakers and advisers, as well as international financial institutions remain upbeat about Vietnam’s development prospect.

Particularly, in the year to date (by September 20) Vietnam lured $22.15 billion in foreign direct investment, up 4.4 per cent on-year. There would be no investors if they did not trust Vietnam’s future.

I believe the strong measures in pandemic containment and a wide range of measures to aid production and business by the government and the whole political system from the central to the local levels, and especially people’s awareness of pandemic prevention and control are the key factors underpinning this trust by global financial institutions that the Vietnaese economy would soon rebound and the contraction is just momentary.

In recent days, infections went down while recovering patients rose. Vaccination is taking place on a broad scale, and there is general public support of the government’s policies. These lay the groundwork for development in the time ahead.

With positive outcomes in pandemic containment, we have reason to believe in better economic performance in the latter months of 2021, creating a motivating force to reach growth targets set for 2022.