Illustrative image (Photo: VNA) Hanoi (VNS/VNA) -Fitch Solutions has revised down its 2020 real GDP growth forecast for Vietnamto 6.3 percent, from 6.8 percent previously, in light of the worsening global COVID-19outbreak.
“We believe that the COVID-19outbreak will heavily impact growth in the first half of the year, mainly dueto disrupted supply chains in the region which would weigh heavily onmanufacturing and weak tourist arrivals as well as general domestic fears ofinfection which would drag on services activity,” analysts of the global financial information servicesprovider said in a report released on February 25.
"That said,our forecasts currently factor in our assumption of a gradualsubsiding of the virus outbreak in the second half of 2020, which underpinsour view for a sharp rebound in trade activity as supply chains andtourism activity normalises."
Fitch forecast Vietnam’s largemanufacturing sector (accounting for 16 percent of the country’s GDP) to comeunder pressure from supply chain disruptions as a result of the COVID-19outbreak in China, which is a key source of raw materials and also a majorexport market for Vietnam.
China is Vietnam’s largestsource of imports, accounting for around 28 percent of total imports, and isits second largest export market after the United States (20 percent),accounting for around 17 percent of total exports.
“We believe that the lack ofinputs and demand shock from Vietnam-China border closures and multi-citylockdowns in China will weigh heavily on manufacturing growth in the first halfof 2020.”
According to Fitch, while somecompanies such as Samsung are flying in inputs to circumvent the supply chaindisruption from China, it believes that many companies, particularly small tomedium-sized firms, are likely to struggle in their search for an alternativesource of inputs at short notice.
Fitch forecast services(accounting for 42 percent of the country’s GDP) growth would also come understress from weaker domestic and foreign demand as work disruptions, which wouldimpact wages, and general paranoia of community cross-infection of thecoronavirus would see weaker retail activities, which account for about 11 percentof GDP.
Weak domestic demand is likelyto also feed through to the rest of the services sector, especially tourism.
“While tourism onlyaccounts for 9.2 percent of total GDP, a shock in this area wouldnevertheless still impact the overall growth outlook for 2020,” the analystsnoted.
However, Fitch believed thatsupport measures by the Government would help alleviate the negative growthshock.
Fitch expected growth torebound in the second half of 2020, assuming the virus subsides by then.
“We believe that this would beunderpinned by a clearing of backlogged factory orders during the first half ofthe year upon the normalisation of supply chains, and pent up tourism demandfollowing an easing of global uncertainty around the virus’ outbreak.”
In addition, Fitch expectedtrade is likely to also benefit from Vietnam’s ratification of the EU-VietnamFree Trade Agreement (EVFTA), which would eliminate tariffs on more than 90 percentof all of Vietnam’s exports to the bloc./.
“We believe that the COVID-19outbreak will heavily impact growth in the first half of the year, mainly dueto disrupted supply chains in the region which would weigh heavily onmanufacturing and weak tourist arrivals as well as general domestic fears ofinfection which would drag on services activity,” analysts of the global financial information servicesprovider said in a report released on February 25.
"That said,our forecasts currently factor in our assumption of a gradualsubsiding of the virus outbreak in the second half of 2020, which underpinsour view for a sharp rebound in trade activity as supply chains andtourism activity normalises."
Fitch forecast Vietnam’s largemanufacturing sector (accounting for 16 percent of the country’s GDP) to comeunder pressure from supply chain disruptions as a result of the COVID-19outbreak in China, which is a key source of raw materials and also a majorexport market for Vietnam.
China is Vietnam’s largestsource of imports, accounting for around 28 percent of total imports, and isits second largest export market after the United States (20 percent),accounting for around 17 percent of total exports.
“We believe that the lack ofinputs and demand shock from Vietnam-China border closures and multi-citylockdowns in China will weigh heavily on manufacturing growth in the first halfof 2020.”
According to Fitch, while somecompanies such as Samsung are flying in inputs to circumvent the supply chaindisruption from China, it believes that many companies, particularly small tomedium-sized firms, are likely to struggle in their search for an alternativesource of inputs at short notice.
Fitch forecast services(accounting for 42 percent of the country’s GDP) growth would also come understress from weaker domestic and foreign demand as work disruptions, which wouldimpact wages, and general paranoia of community cross-infection of thecoronavirus would see weaker retail activities, which account for about 11 percentof GDP.
Weak domestic demand is likelyto also feed through to the rest of the services sector, especially tourism.
“While tourism onlyaccounts for 9.2 percent of total GDP, a shock in this area wouldnevertheless still impact the overall growth outlook for 2020,” the analystsnoted.
However, Fitch believed thatsupport measures by the Government would help alleviate the negative growthshock.
Fitch expected growth torebound in the second half of 2020, assuming the virus subsides by then.
“We believe that this would beunderpinned by a clearing of backlogged factory orders during the first half ofthe year upon the normalisation of supply chains, and pent up tourism demandfollowing an easing of global uncertainty around the virus’ outbreak.”
In addition, Fitch expectedtrade is likely to also benefit from Vietnam’s ratification of the EU-VietnamFree Trade Agreement (EVFTA), which would eliminate tariffs on more than 90 percentof all of Vietnam’s exports to the bloc./.
VNA
