The fourth outbreak of the COVID-19 pandemic has seriously affected the socio-economic situation of the country. However, since the end of the third quarter of 2021, efforts to control the disease nationwide have shown positive results while forecasting agencies at home and abroad are optimistic about Vietnam's growth prospects in the medium and long term.

In the third quarter of 2021, gross domestic product (GDP) reversed to negative growth, dragging the nine-month growth to only 1.42% over the same period last year, much lower than that forecasted. However, in the context of wide and prolonged outbreaks of the pandemic in many localities, positive growth in three quarters of such a difficult year is an encouraging result.

The production line with Chinese investment at Jasan Vietnam Textile and
Dyeing Co., Ltd in Pho Noi B Industrial Park (Hung Yen). (Photo: VIET CHUNG)

Macroeconomic stability

According to the Ministry of Planning and Investment, a highlight in Vietnam's economic picture in the past nine months has been that the macro economy has been stable, inflation has been controlled at a low level and major balances of the economy have been basically maintained.

State budget revenue has also achieved positive results while budget expenditure has timely funded pandemic prevention and control and has supported people and businesses affected by the pandemic.

Besides, credit growth increased by 7.39%, positively supporting economic growth. Notably, the survey conducted by the General Statistics Office in September recorded that more than 70% of enterprises in the processing and manufacturing are optimistic about the production and business situation by the end of the year. .

In particular, nine-month foreign direct investment (FDI) inflows showed signs of recovery, rising by 4.4% over the same period last year after many months of decline.

Dorsati Mandani, Senior Economist at the World Bank Vietnam said that Vietnam is still among the good economic performers, a key sign of resilience, showing the solid foundation of the economy and the confidence of foreign investors in Vietnam.

However, the economy is facing unprecedented difficulties due to the prolonged pandemic. GDP in the third quarter decreased by 6.17%, posing many risks to macroeconomic stability and the major balances of the economy.

Growth pillars, including industry, construction and services, all fell sharply. Meanwhile, the progress of disbursement of public investment capital has yet to meet the set requirements.

The production and business sectors are facing many difficulties, which may affect growth momentum in the future if no timely support measures are in place . In addition, jobs, livelihoods and people's lives have been severely affected, especially in urban areas.

Opening doors and safely adapting to COVID-19

With the Government's timely redirection from “no COVID-19” to “safe adaptation to COVID-19”, the pandemic has been gradually brought under control in the southern provinces from the end of September.

This turning point has helped production and business activities to resume according to the roadmap of opening the economy in a new normal state and catch up with the general trend of the world.

President of the Vietnam International Arbitration Centre, Vu Tien Loc, said that the last three months of the year is a golden time for recovery prospects as we have controlled the pandemic quite well and created favourable conditions to open the economy.

The economic recovery needs to start from the point of view that “every ward is a cell” in a living organism - the whole national economy. If localities are divided by geographical boundaries, the economy and businesses will be severely affected, so the whole country must join hands to gradually open the door, Loc noted.

Loc added that, in this process, enterprises must be considered a participant in the response to the pandemic, thereby they should be trusted, empowered and equipped with on-the-spot medical capacity instead of just treating them as an object subject to State management as before.

According to Assoc. Prof, Dr. Tran Dinh Thien, former director of the Vietnam Economic Institute, the positive results in the pandemic prevention and control at the end of September along with the cautious reopening of the economy in many localities are strengthening the confidence of enterprises to actively restore production and business. The economy also is showing signs of strong recovery including the growth of the FDI sector.

Public investment activities have also received much attention as the Prime Minister has set up a special working group to promote the disbursement of public investment with a focus on removing bottlenecks regarding the investment processes.

In October 2021, the Ministry of Planning and Investment is expected to submit to the Government an economic recovery project based on three driving forces: production and business, export, and investment. This is a comprehensive and synchronous project with large enough resources to promote economic recovery associated with structural reform, competitiveness and the resilience of the Vietnamese economy in order to avoid further shock in the future.

Chief Economist of the Bank for Investment and Development of Vietnam Can Van Luc proposed the Government devise specific solutions in terms of resources and implementation of policies to create resilience in the economy. The acceptance of increases in public debt and budget deficits at reasonable levels and increases in credit until 2023 is among the proposed solutions.

He also recommended the issuance of government bonds and the borrowing of international credit as Vietnam still has room for public debt while interest rates are low.