Vietnam’s bright economic outlook in 2021

Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said the public’s confidence in the leadership of the Party and the State has been demonstrated through the fight against COVID-19.

Fire proves gold, adversity proves men

According to a report by the General Statistics Office (GSO) under the Ministry of Planning and Investment, in 2020, all socio-economic sectors in Vietnam have been greatly impacted by the pandemic as the country is integrating intensively and extensively into the world.

Such activities as production, supply and commercial circulation, along with aviation, tourism and employment have been disrupted, the report said. Businesses have been hardest hit, with many suspended, bankrupted, dissolved and scaled down.

The report unveiled that in 10 months, up to 41,800 enterprises had to cease their operation, up 58.7 percent year-on-year, and 13,500 completed dissolution procedures, up 0.1 percent.

Given this, the Vietnamese business community has employed multiple solutions to maintain operation such as boosting e-commerce, offering new products and services, and seeking new markets.

During the 10-month period, about VND3.8 quadrillion was injected into the economy, representing a rise of 17 percent over the corresponding time last year.

Total export-import value in the first 11 months was estimated at 489.1 billion USD, up 3.5 percent year-on-year, of which exports reached US$254.6 billion, up 5.3 percent. Trade surplus in the reviewed period swelled to record high of US$20.1 billion.

Vietnam’s success in containing COVID-19 has also turned the country into a trust-worthy destination for foreign investors, as well as a promising and safe venue for the reallocation of international investments, with many major groups moving production out of China.

As of November 20, newly-registered and additional capital and share purchase by foreign investors totaled US$26.43 billion.

Experts said businesses have reviewed their resilience, adaptability, weaknesses and strengths to revamp their production and business models towards efficiency and sustainability.

The pandemic has changed consumption demand, enabling Vietnamese enterprises to expand the market.

Notably, international integration policies will facilitate Vietnam’s deeper integration into the global value chain, and the formation of new value chains, experts said, suggesting the country bring into full play the EU-Vietnam Free Trade Agreement that took effect in August 2020.

The National Assembly has approved a resolution on socio-economic development plan for 2021, aiming to complete the dual goals of pandemic combat and socio-economic recovery and development.

Three fulcrums for economic recovery

Experts of the Asian Development Bank (ADB) believe that Vietnam is showing stronger resilience than most similar economies and that its medium- to long-term economic outlook remains positive.

The Asian Development Outlook (ADO) 2020 Update, ADB’s annual flagship economic publication, says Vietnam’s economy will benefit from the continued persion of production from China to Vietnam, and the implementation of the European Union – Vietnam free trade agreement.

“Lower domestic consumption and weak global demand caused by COVID-19 have hurt Vietnam’s economy more than expected. But economic growth will be resilient in 2020, in large part due to the government’s success in controlling the spread of COVID-19,” said ADB Country Director for Vietnam Andrew Jeffries.

Economic growth will be supported by the country’s macroeconomic stability, increased public spending, and ongoing reforms to improve the business environment, he added.

ADO 2020 Update says Vietnam’s economic outlook over the medium and long term remains positive. The country’s participation in a large number of bilateral and multilateral trade agreements will help the country’s economic rebound.

Vietnam will also likely benefit from the current shifting of supply chains to low-cost countries, it says.

However, a prolonged global COVID-19 pandemic remains the biggest risk to Vietnam’s growth outlook this year and next year, it notes, adding that another threat is global trade tensions, which lead to rising trade protection and financial risks that could be exacerbated by a prolonged pandemic.

Vietnam’s economy is expected to grow 1.8 percent in 2020 amid the COVID-19 pandemic and bounce back to 6.3 percent in 2021, the experts believed.

Vo Tri Thanh, Director of the Institute of Branding and Competition Strategy, pointed out three fulcrums for Vietnam’s economic recovery, firstly production and export.
Public investment is likely to be stepped up thanks to the Government’s drastic measures, and a clearer legal framework, he added.

The third lies with private investment, particularly foreign direct investment, according to Thanh.