VN economy likely to enjoy long-term benefits despite COVID-19

According to the publisher, Vietnam has avoided a year of lockdowns, high death tolls, overwhelmed hospitals, and ongoing national arguments about the COVID-19 situation.

“The economy, bars and all, has stayed open, propelling it to one of 2020's highest growth rates even while neighbouring countries wrestled with recession,” Nikkei Asia reports.

It adds that despite the decimation of health systems and economies globally, 2020 saw the country sign three trade deals with major foreign powers. In addition, it lured significant investors such as Apple, another airline was launched, and the nation rose to sixth in Southeast Asia in terms of per capita income.

“The contrast between life inside and outside Vietnam’s borders could hardly be starker. Outside, hospitals are deluged and families hole up indoors for the better part of a year. Inside, people share entrees, go to school, fly on weekly business trips, hit the gym, and cram into buses and elevators. The same dynamic is reflected in the economy,” Nikkei Asia adds.

“Recall that when the COVID-19 epidemic first emerged, the World Trade Organization and others forecast a plunge in global trade," Don Lam, CEO of VinaCapital told Nikkei Asia, adding that some suggested, "Vietnam was among the countries at the greatest risk because exports play such an important role in its economic growth."

"Instead, the opposite has come true. Vietnam's openness to trade is playing a key part in its quick economic recovery," he explained.

According to Nikkei Asia, with work-from-home shopping booming in the United States and Europe, local electronics and furniture exporters took advantage its rise in demand. Manufacturers moved to take orders from nearby countries where COVID-19 shutdowns had rendered rival factories idle.

The article also praises the performance of health services, whose successful performance has allowed the country to enjoy its biggest economic opportunity in decades. Last year Vietnam achieved an economic growth rate of 2.9%, emerging as one of few countries with positive growth. It aims to reach 6.5% in GDP growth in 2021.

Moreover, 2020 also saw the country sign three trade deals, including the Regional Comprehensive Economic Partnership (RCEP), and another deal with the United Kingdom.

Nikkei Asia believes that thanks to economic growth, Vietnam has reached a small milestone. Indeed, GDP per capita squeezed past that of the Philippines, according to October projections from the International Monetary Fund. In absolute terms, Vietnamese GDP overtook that of Singapore and Malaysia, making it the fourth-largest economy throughout Southeast Asia for the first time.

According to reports by the Japanese media outlet, the Communist Party's economic tool of choice, the five-year plan, puts the technology sector at the centre of Vietnamese ambitions to become an upper-middle-income country by 2025. In an effort to meet this goal, Vietnam recorded a handful of high-profile investments last year, including Pegatron, a supplier for Apple and Samsung, and LG Electronics, which relies on the Vietnamese market for its vehicle and smartphone businesses.

The electronics sector already comprises the largest Vietnamese export category, although it is dominated by basic production and assembly. Vietnamese officials state that they will approve high-tech and eco-friendly investments with more added value moving forward.

Nikkei Asia also reports that Qualcomm, the world’s biggest supplier of phone chips, is a tech firm keen on relocating to Vietnam. In June it debuted a research and development centre in Hanoi, its largest in Southeast Asia outside of Singapore.