For the first time Vietnam is launching a series of relief packages worth approximately VND600 trillion (US$25 billion) to get the national economy back on track after being badly affected by the novel coronavirus epidemic (COVID-19).

Processing seafood for export in Dong Thap province (Photo: VNA)

Roughly VND256.6 trillion of the total sum will be sourced from the State budget, with the remainder coming from the central bank, Vietnam Social Insurance, Vietnam Electricity, credit organisations, and telecommunication groups. The money will then be put into offering support to boost production, aid business services, and ease social welfare measures. 

This move can be considered as an unprecedented step to cushion the impact of the COVID-19 epidemic by speeding up economic recovery and kickstarting the post-virus period. 

A serious economic impact

According to Minister of Planning and Investment Nguyen Chi Dung, the COVID-19 epidemic has taken a heavy toll on the Vietnamese economy, with the impact being described as serious. The first quarter of the year saw the economy grow by 3.82% annually, representing a record low since 2011. 

The longer the epidemic goes on for, the more serious the economic impact is expected to be. It is highly unlikely that the 6.8% growth target set for this year will be met. Providing that the epidemic is contained during the second quarter, GDP growth is forecast to rise to approximately 5.32%, and if the epidemic runs through to the third quarter, growth is projected to slow to 5.05%.

A number of macro indicators are set to be badly affected, with sharp declines likely to be recorded in terms of the state budget revenue, import-export value, along with private investment and foreign direct investment due to decreasing demand globally. Investors seem to become more prudent in terms of decision making and are diverting investment to safe locations.

A chance for economic development beckons

Despite having far-reaching consequences, the epidemic may present an opportunity for countries to recover from the initial shocks providing that they know how to take advantage of the rapidly-changing landscape in terms of the global economy and trade.

Since the start of the COVID-19 epidemic early this year, Minister Dung states that Vietnam has been actively serving the interests of the international business community by promoting the country as a safe and sustainable investment and business destination.

Simultaneously, the Government has made moves to assess the impact of the epidemic on the economy, delved into forecast trends, and identified new drivers of growth as a basis for accelerating and restructuring the economy. This has been done whilst taking into account development needs, digital transformation, employment demand, along with investment and consumption trends among others.

The Government has therefore requested that ministries and agencies come together to devise plans for the recovery scenarios of every industry, locality, and business sector as a means of making it easier for the economy to be up and running as soon as possible in the post-virus period. 

Withstanding the initial economic shock 

It is widely expected that a severe economic downturn will not occur if the Government succeeds in keeping the spread of the COVID-19 in check. Indeed, the preventive measures introduced by the Government over the past few months have proved effective, helping to bring the outbreak under control with no new locally-transmitted infections being reported nationwide over the past four weeks. 

In addition to efforts aimed at containing the epidemic, the country has managed to maintain production and social stability in order to weather the initial storm. The timely enactment of economic stimulus and social welfare packages, implemented alongside flexible monetary and fiscal policies, has helped to strengthen the economy's capacity to recover from some of the early shocks.

With other sources of investment beginning to slow down, the effective disbursement of public investment worth nearly VND700 trillion which has been allocated for the year looks set to promote post-epidemic economic growth.

Experts believe that Vietnam’s overall goal is to maintain macro-economic stability, control inflation, and stabilise financial and monetary markets alongside its banking system.

According to Prof. Andreas Stoffers, Vietnam country director for Friedrich Naumann Foundation for Freedom, the nation will certainly be able to weather the COVID-19 storm due to the prudent monetary and fiscal policy introduced, while also serving as a role model for other countries to follow.