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Vietnam Determined To Beat Virus With Economic Turnaround

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Vietnam has done the best in dealing with the Covid-19 pandemic . But we can’t be oblivious to the challenge that this crisis poses for the country’s future economic growth. 

So far , Vietnam had performed quite well in curing infected patients. It even managed to stop fresh casualties after last week.  The Vietnamese government has taken a number of bold steps : closing down schools and universities, fining those spreading  fake news on  social media acounts, and enforcing a travel ban on those who had been to Covid-affected areas.

But on March 2, a Vietnamese woman, after traveling to three European countries, flew back to Hanoi from London on Vietnam Airlines flight 0054 . On landing , she tested Covid positive. Hers was the 17th infection in Vietnam, and soon other passengers on that flight were found be down with Covid.  Vietnam’s coronavirus has now crossed 60 confirmed cases and a hike is surely possible.

The shows that the best efforts of the Vietnam government can come undone  — and that is worrying for the country’s 2020 ’s economic outlook .

 Vietnam is already bleeding economically. Its burgeoning industrial sector has come to nought with many airlines  cancelling their flights to the infected destinations. The most affected are tourism, transport, electronics, agriculture, and insurance. Food, retails and entertainment sectors have also taken a huge hut.

In Jan-Feb 2020, the pandemic badly dented Vietnam tourism. A survey conducted by the Vietnam Tourism Advisory Council shows that the hotel bookings and occupancy rates from the north to the south in Vietnam were decreasing by between 20 and 50 percent compared to the same period last year. The number of international visitors coming in March 2020 is expected to be reduced by over 60 percent, and domestic tourists may be reduced by 80 percent due to fears of this deadly virus. The tourism workforce was asked to take unpaid and temporary leave. Conservative estimates indicate  the pandemic will result in a loss of between $5.9 and $7 billion for Vietnam’s tourism in the next three months.

But that is only part of the problem. Vietnam’s stock market has been hit hard as well and the country’ s state-owned enterprises are facing huge challenges. Other economic indicators, including the volume of imported goods to Ho Chi Minh City such as machinery, equipment, iron, steel, and petroleum, have all decreased significantly relative to the previous year per statistics from Ho Chi Minh City Customs.

 Vietnam has taken its fair share of additional steps to counter the coronavirus that instill confidence in the government’s ability to respond. For instance, all foreigners and visitors are required declare their health conditions upon arriving the country, and Vietnam suspended the visa waivers program for eight European countries that have a large number of confirmed coronavirus cases. The Vietnam State Bank has emphasized that more economic steps are likely on the way, including reductions in the interest rate in addition to the announcement of a stimulus package by the government and reductions in tax rates and fees by the finance ministry.

Without doubt,  the economic impact on Vietnam is likely to be significant and growing. Even ahead of the current situation, the Asian Development Bank’s recent report showed that Vietnam would lose 0.41 percent of GDP because of the coronavirus outbreak, which will temporarily cause “decline in domestic consumption in China and other outbreak-affected economies, in tourism and business travel; spillovers of weaker demand to other sectors and economies through trade and production linkages; supply-side disruptions to production and trade.” A former Vietnamese government adviser claimed that the coronavirus outbreak will cause Vietnam’s economic growth rate to reduce around 1 percentage point from its target, to around 5.9 percent or 6 percent.

The Vietnamese government plans to stick with its target growth rate of 6.8 percent this year. But given Vietnam’s current coronavirus challenge, this target makes little sense and is likely unachievable. The economic damage may be difficult to estimate exactly, but it is clear that the economy is likely to shrink further in the coming months and suffer more in line with global realities as well as national developments. Unless the Vietnam government can fully and comprehensively contain the outbreak quickly, the situation for Vietnam is likely to get worse before it gets better. 

As of April 27, Vietnam’s Ministry of Health confirmed a total of 270 cases of COVID-19. However, 225 of the affected patients have recovered and been discharged from hospitals.Vietnam’s Prime Minister issued Directive No. 19 on measures to cope with COVID-19 on April 25. The measures include the washing of hands, and wearing masks while banning religious gatherings, festivals, and sporting events. In addition, bars, pubs, beauty salons, and karaoke bars will continue to remain closed until further notice.

Vietnam’s locally made test kit for COVID-19 has been approved by the World Health Organization (WHO) after enduring five rounds of testing and quality assessments. Vietnam ended the social isolation guidelines at the end of April 22, though restrictions will continue in some high-risk areas. While the social isolation guidelines in Hanoi and Ho Chi Minh City have also been lifted, some restrictions continue to remain for bars, clubs, spas, theaters, sports centers, and others while the gathering of more than 20 people is prohibited. Restaurants and eateries that operate must comply with strict guidelines from local authorities.Taxis, buses, Grab services and inter-provincial transport have also resumed though with restrictions as per the transport authorities.

Honda Vietnam announced that it would resume automobile and bike production from April 23.The Ministry of Transport has allowed the increase in the frequency of domestic flights on the Hanoi-Ho Chi Minh City route as well as the reopening of other domestic routes. However, this will depend on demand, and travelers should still confirm travel details with the airlines.Vietnam has stated that it will organize flights to bring Vietnamese citizens from Canada, France, Indonesia, Japan the Philippines, Russia, Singapore, Spain, Thailand, the US, and the UAE.   

Vietnam is confident to bring back normalcy within two months if it manages any major fresh spurt of the pandemic. And it is keenly looking to relocation of a huge number of China-based industries run by foreign investors like those from Japan and the West.  Vietnam has made a strong case for attracting that investment even before the Covid when Trump unleashed his trade war on China. The case will grow stronger by the day. There are many other contenders in that cue — our friend India , with its massive domestic market , is surely one of them. But we have an edge, at least at the moment.

(Cat Hoang Anh works for Voice of Vietnam and is regular contributor for Easternlink)

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