Container trucks cross Vietnam’s Kim Thanh Border Gate No.2 with China in the northern
province of Lao Cai, February 16, 2020. Photo by VnExpress/Giang Huy. 

Sketching a worst case scenario, a government report says the Covid-19 epidemic could cost the state VND42.3 trillion ($1.82 billion) in lost budget revenues. 

The loss can happen if the novel coronavirus is contained only by the end of the second quarter, the Ministry of Planning and Investment (MPI) says in its epidemic damage assessment report.

If this happens, budget revenue for the year is likely to be VND1.47 quadrillion ($63.1 billion), down 1.6 percent from pre-epidemic estimates.

If the epidemic can be controlled by the end of the first quarter, budget revenue would fall 1.2 percent below the estimates, equivalent to a loss of VND18.1 trillion ($777 million). 

The report says the epidemic will hit three main revenue streams, which are domestic production and consumption, import-exports, and crude oil. Industries directly affected, like tourism, transportation and trade in agricultural commodities, are likely to be hit hardest by the epidemic.

Businesses with strong storage capacities and the ability to exert flexibility in production will be less affected, but most likely be unable to maintain pre-epidemic levels.

If the epidemic lasts longer, 4-5 more months, the damage will spread to industries, commodity groups and production sectors that use a large proportion of imported equipment and raw materials from China, like textiles, footwear, electronics, and consumer goods production. In these sectors, not even multinationals such as Apple, Samsung, and LG are likely to escape the epidemic’s impacts, the report says.

The epidemic is also likely to slow down projects using capital, labor and input materials from China, affecting the growth of related industries and fields. Export of goods to China will also slow down given cross-border travel restrictions, which will reduce demand and, in turn, domestic production.

This could see Vietnam’s combined import and export turnover fall by 15-20 percent compared to previous estimates, cutting revenue from taxes and duties, the report says.

It also notes that global crude oil prices have already fallen to $50-52 a barrel because of reduced demand from China, which will affect Vietnam’s crude oil prices and revenue from the commodity. Global crude prices were hovering above $60 in late February and early January.

A previous report from MPI estimated that the Covid-19 could slow Vietnam’s GDP growth from over 7 percent in 2019 to 6.09 percent this year if the disease is contained in Q2.

As of Wednesday morning, the new coronavirus had infected 16 people in Vietnam and killed 2,009 globally.