Covid-19 forecast to slow Vietnam’s 2020 economic growth

09:35 | 09/03/2020 Society

(VEN) - The Ministry of Planning and Investment (MPI) has submitted two scenarios for economic growth this year to the government, as the country faces the impact of the coronavirus in China.

covid 19 forecast to slow vietnams 2020 economic growth
The 2019 novel coronavirus (Covid-19) outbreak is affecting different industries

Lower GDP growth estimated

According to the MPI, the 2019 novel coronavirus (Covid-19) outbreak will affect Vietnam’s economic growth and consumer price index (CPI).

In the first scenario, if the epidemic is controlled promptly in the first quarter of this year, Vietnam’s gross domestic product (GDP) growth rate is estimated at 6.27 percent, 0.53 percentage points lower than the target set by the government in its Resolution No.1. First quarter growth under this scenario is estimated at 3.8 percent, 6.55 percent in the second quarter, 7.07 percent in the third quarter, and 6.81 percent in the fourth quarter of 2020.

The second scenario, which assumes the epidemic is only controlled in the second quarter, the estimated GDP will only grow 6.09 percent over the previous year, 0.71 percentage points lower than the target, with growth estimated at 3.8, 5.81, 7.05 and 6.81 percent in the first, second, third and fourth quarter, respectively.

Deputy Minister of Planning and Investment Tran Quoc Phuong said at the government’s February 5 press conference that achieving 6.8 percent GDP growth in 2020 as set out in Resolution No.1 would pose a major challenge.

According to the MPI, the epidemic might last through the first quarter or even into the second quarter of 2020, making it difficult to accomplish the objectives and targets of socioeconomic development assigned by the National Assembly, especially economic growth, trade, import and export in each quarter and the whole year.

The ministry said the epidemic would also greatly affect the target of controlling inflation below four percent this year. If the epidemic continues into the second quarter, in addition to the impact of petrol price adjustments, natural disasters, adverse weather and increasing pork prices, the average CPI this year could rise 4.86 percent compared with last year.

Promoting public investment disbursement

Deputy Minister of Planning and Investment Tran Quoc Phuong said at the conference that the above figures are estimations. The reality depends on when the epidemic is controlled, as well as policies, impacts, and administration of the government on the economy.

Phuong said the MPI had proposed to the government two packages of solutions. The first package includes measures to prevent and control the outbreak of Covid-19, while the second aims to recover production, ensuring supply and demand, stabilizing goods prices, and implementing policies to stimulate production and promote economic growth.

Phuong said the ministry also emphasized solutions to the disbursement of public investment. “It is necessary to immediately resolve administrative procedures and other problems so that businesses can start construction and implement large-scale projects, creating a spillover effect on socioeconomic development of localities and regions,” he added.

The Vietnam Institute for Economic and Policy Research (VEPR) forecast that Vietnam could reach economic growth of 6.48 percent in 2020. In the long-term, Vietnam’s economic growth will continue to depend on foreign direct investment (FDI) and outcomes of the institutional barriers removal, business environment improvement and state-owned enterprise privatization. International trade and investment activities are expected to prosper after the signing of such free trade agreements (FTAs) as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). However, according to VEPR, Vietnam needs to be cautious in international trade relations.

The Ministry of Planning and Investment predicted that the country’s export value might decrease 21 percent compared to 2019, with industries considerably affected including farm produce export, processed agricultural products, textiles and garments.

Thu Phuong