Illustrative image (Source: VNA)
Hanoi (VNA) – The Vietnam Institute for Economic and Policy Research (VEPR) presented three economic growth scenarios during the COVID-19 crisis on April 13.
According to Director of VEPR Pham The Anh, Vietnam’s gross domestic product (GDP) growth of 3.82 percent in the first quarter of this year was quite positive compared to other economies in the region.
However, this increase did not fully reflect the impact of the COVID-19 epidemic, which is also affecting the informal sector, including small restaurants and hairdressers.
For Vietnam’s economic prospects in 2020, the VEPR offered three scenarios.
The first, the most optimistic one, revolves around the pandemic being controlled by May and all economic activities gradually returning to normal. Countries around the world will start easing lockdown measures. As a result, domestic economic activities, especially those in the field of services, will be resumed gradually from the latter half of the second quarter.
Under this scenario, the agriculture, forestry and fishery sector would see negative growth (decrease by 2-3 percent), as would the mining sector throughout the year.
In terms of services, the worst affected sectors would include transportation and warehousing, accommodation and catering services, arts and entertainment (reduction of 20-50 percent).
Health, media and finance - banking - insurance would maintain good growth thanks to their activities related to the prevention of COVID-19.
From the third quarter to the end of the year, the growth of industries could return to similar rates seen in recent years. The whole year’s growth rate would reach 4.2 percent.
For the second scenario, it is assumed that the pandemic would continue until August. The world would continue social distancing due to the outbreak at many important economic and financial centres. Economic activities would only return to normal at the end of the third quarter.
The second and the third quarters would see negative GDP growth of 4.9 percent and 1.1 percent, respectively, marking growth for the whole year of 1.5 percent.
The third scenario looks at the pandemic being controlled in November this year. During this period, the world would continue social distancing measures.
With this scenario, the economy would begin recovering in the second half of the fourth quarter this year.
GDP growth in the second and the third quarters were forecast to be negative 5.1 percent and 5.3 percent, respectively, marking the whole year’s GDP growth to be negative 1 percent.
The VEPR recommended that, in every situation, it was necessary to create the best conditions for businesses to operate with adaptive solutions to promote production as well as preventing the outbreak of COVID-19.
For businesses affected but still in operation, criteria would be needed to classify the level of impact, along with benefits including exemption from social insurance fee, land rent and loan interest, extension of value-added tax collection, exemption from corporate income tax, and concessional loans for feasible business projects.
For businesses that had an effective transition, such as producing face masks for export, it would be essential to give them incentives to promote production.
Doctor Nguyen Tri Hieu, a finance-banking expert, said it would take about six months or one year for Vietnam’s economy to recover.
If the country could curb the disease at the end of June, the optimal economic growth is forecast to near 5 percent, according to Hieu.
In the worse-case scenario, if the epidemic at home and abroad remains serious at the end of the year, the local economy would be significantly affected and could see negative growth, he said.
He noted that Vietnam’s 2019 GDP exceeded 300 billion USD. Under this scenario, the local economic growth could be lower than this level./.
