Although the Vietnamese economy has been greatly affected by impacts of the COVID-19 pandemic, that has tightened the labour supply, lowered industrial output, and disrupted agricultural value chains, the Asian Development Bank (ADB) remains bullish about the country’s prospects in the medium and long term.

Illustrative image (Source: VNA)

Although the Vietnamese economy has been greatly affected by impacts of the COVID-19 pandemic, that has tightened the labour supply, lowered industrial output, and disrupted agricultural value chains, the Asian Development Bank (ADB) remains bullish about the country’s prospects in the medium and long term.

Lower GDP forecast

Under the Asian Development Outlook (ADO) 2021 Update, the ADB has revised down Vietnam's 2021 GDP growth forecast from 6.7 percent to 3.8 percent due to a resurgence of the COVID-19 pandemic that has tightened the labour market, lowered industrial output, and disrupted agricultural value chains.

At a virtual press conference, ADB Country Director Andrew Jeffries said the prolonged COVID-19 pandemic and extended lockdowns have weakened consumption and investment, hampering Vietnam’s growth prospects. “But the Vietnamese economy will bounce back if the COVID-19 pandemic is brought under control by the end of 2021 and 70 percent of the country’s population are vaccinated by the second quarter of 2022," he said.

ADB remains bullish about the country’s prospects in the medium and long term. Growth could be aided by a revival of domestic demand, an acceleration in the disbursement of public investment, and an expansion to new export markets thanks to multiple free trade agreements and the expected global economic recovery.

The country’s economy is expected to grow 3.8 percent this year and 6.5 percent in 2022, according to the bank.

Growth picked up in the first half of 2021, largely because of higher trade volumes, but slowed down in the second half of the year as the fourth wave of the pandemic took a toll on businesses and the labour market, according to the ADB.

Economic growth depends on pandemic control results

As of September 15, only 33 percent of the country’s population had received COVID-19 vaccines and only under 6 percent got the full two shots. The ADB commented that the low rate of vaccinated people will limit the number of the workforce returning to production this year.

Earlier, Minister of Planning and Investment Nguyen Chi Dung said that if the COVID-19 pandemic is put under good control in September, the country’s gross domestic product (GDP) growth may reach 3.5-4 percent in the whole year.

The minister held that although the predicted result is lower than the set target, it requires greater efforts of the whole political system and localities.

If this scenario becomes true, 2021 will be the second year that Vietnam fails to complete its growth target, which will affect the implementation of the overall development plan for the 2021-2025 period. Last year, Vietnam’s GDP growth only expanded 2.92 percent due to impacts from the pandemic.

Dung emphasized social distancing measures have greatly affected production and business activities as well as employment. Meanwhile, the cost for pandemic prevention and control is high, which affects the State budget collection and spending, he said, adding that the pandemic have also impacted on the establishment of new firms and the attraction of foreign direct investment.

Particularly, weak domestic consumption of agricultural products and high prices of input materials have also caused difficulties for businesses’ production expansion, he said.

The minister reminded localities to grasp all opportunities to catch up with the recovery trend of world major economies which have great impacts on the Vietnamese economy. He suggested that some localities should not depend on only one or two foreign-invested firms to secure economic growth.

In order to boost economic growth in the rest of the year and 2022, Dung pointed out a number of solutions, including the good control of COVID-19 and the avoidance of another outbreak that may crack down production and supply chains.

Besides, localities should increase meetings and dialogues with local businesses to create a more favourable investment environment for them, while ensuring social security, supporting pandemic-hit people, and actively building their own economic recovery plans.

ADB country director Andrew Jeffries recommended that the growth prospects in 2021 and 2022 depend on the timely and adequate supply of essential items such as foodstuff and cash to those affected by the pandemic.

He suggested that Vietnam can benefit from removing administrative hurdles to business and people, and accelerating digital transformation, which will help improve the efficiency of pandemic containment measures and support a sustainable economic recovery this year and next./.