ADB: Vietnam's economy remains strong in the face of COVID-19

Economic growth remained solid in 2020 largely thanks to the Government's success in controlling the spread of COVID-19. Vietnam's economic outlook in the medium and long term remains very positive.

This is the opinion of ADB experts at the Asian Development Bank (ADB) press conference on September 15 in Hanoi.

At the launch of the Asian Development Outlook (ADO) 2020 Update Report, Mr. Andrew Jeffries, Country Director of ADB in Viet Nam, said that the decline in domestic consumption and weakening global demand due to COVID-19 have affected the economy Vietnam is more than expected. But economic growth will remain solid in 2020, largely thanks to the Government's success in controlling the spread of COVID-19. Economic growth will be supported by Vietnam's macroeconomic stability, increased public spending, and ongoing reforms to improve the business environment.

The ADO 2020 report, ADB's leading annual economic publication, analyzes that Vietnam's economy will benefit from the ongoing shift in production from China to Vietnam; the recovery of China's economy, and the implementation of a free trade agreement with the European Union. Low growth will keep inflation at 3.3% in 2020 and 3.5% in 2021.

Vietnam's economic outlook in the medium and long term remains very positive. Vietnam's participation in a large number of bilateral and multilateral trade agreements will help the country's economy recover. Vietnam is also more likely to benefit from the current shift of supply chains to lower-cost countries.

Regarding the general outlook, ADB experts analyzed that Vietnam's economic outlook in the near future will be difficult, in the context of the global economic recession and the domestic slowdown is showing worse than expected. However, Vietnam is showing stronger resilience than most other similar economies, and the outlook for the economy in the medium to long term remains positive.

"Economic fundamentals have not yet deteriorated, and Viet Nam has the prospect of benefiting from current global trade, investment, and manufacturing trends," ADB said.

However, major risks such as the prolonged COVID-19 pandemic globally remain the biggest risk to Vietnam's growth prospects this year and next. In addition, the report also said that other threats are global trade tensions, leading to increased trade protectionism and financial risks that could be exacerbated by the prolonged pandemic.

Answering a question on the issue of public investment disbursement, Mr. Andrew Jeffries, Country Director of ADB, affirmed that ADB is a long-term lending partner of Vietnam, most of which is used in public investment.

In the context of the epidemic, the decline of the global economy has caused a sharp decline in private investment, the Vietnamese Government has had a "wise" solution when promoting public investment, supporting economic growth.

There are still many challenges when the disbursement progress is affected due to project implementation stages such as impact assessment, site clearance, some things are more difficult when there is an epidemic, etc but the disbursement progress this year is still higher than in recent years.

"ADB is committed to working with Vietnamese partners to more effectively implement more effective public investment projects in the future," said Andrew Jeffries.

In the banking sector, ADB said that lending activities will continue to be weak despite the SBV's support measures. Banks, for their part, may not want to relax lending standards to accept weaker balance sheets, due to concerns about an increase in bad debts at the end of the loan restructuring period. Credit demand from enterprises also decreased, along with low demand for products and services of enterprises. Therefore, bank credit is forecast to increase by only 10% this year, much lower than the SBV's growth target of 14.0%.

It is worth noting that the unemployment rate is likely to continue to rise. A joint study by the International Labour Organization and ADB predicts that 548,000 young workers in Viet Nam will lose their jobs if the pandemic lasts for a long time, and this number is 370,000 even if the pandemic is effectively contained.

Analyzing foreign investment, Mr. Nguyen Minh Cuong, ADB's Chief Economist, said that in 2021, investment will be boosted thanks to improved public investment disbursements, production activities continue to shift from China to Vietnam, China's economy recovered and a free trade agreement with the European Union came into effect to liberalize trade. The Japan Foreign Trade Organization has announced a list of 15 Japanese enterprises that will move their production activities from China to Vietnam. The majority of enterprises have moved to Vietnam to produce medical equipment, and the remaining enterprises produce semiconductor equipment, telephone components, air conditioners or power modules.

Vietnam needs to change the way of competition to attract investment, not relying on incentives and low costs as before, but relying more on quality, creating efficiency in terms of quality, labor productivity, etc Logistics.

"It is important whether those investors meet standards, transfer technology, meet environmental standards, create conditions for domestic enterprises to connect or not", Mr. Nguyen Minh Cuong recommended.

According to Chinhphu.vn/Huy Thang