06:00 | 10/12/2020 Economy
(VEN) - According to a recently announced Nikkei Asia report, Vietnam still maintains stable economic growth while other economies in the Southeast Asian region are struggling for recovery. Vietnam is the only model of economic success in the region in the current context and is the only ASEAN member country forecast to maintain growth in the first half of 2021.
Effective pandemic control, export growth
In the third quarter of 2020, Vietnam’s gross domestic product (GDP) grew 2.6 percent compared with the same period last year, marking the second consecutive quarter of positive growth. The International Monetary Fund (IMF) forecast Vietnam will maintain economic growth for the whole year and rank fourth among Southeast Asian countries in terms of GDP growth, surpassing Singapore, Malaysia and the Philippines.
The Vietnamese economy’s results are attributed to its successful control of the Covid-19 pandemic. Vietnam applied nationwide social distancing measures only for the first three weeks of April 2020 and resumed normal production activities more quickly than other countries in the region. Job losses have been restricted and consumer spending that accounts for 70 percent of Vietnam’s GDP remains stable.
Export growth and the shifting of manufacturing facilities and supply chains from China are also promoting Vietnam’s economic growth. General Department of Vietnam Customs data show that in the first 10 months of this year, Vietnam’s foreign trade value reached US$440.09 billion, a year-on-year increase of 2.7 percent. Of this total, export value reached US$229.79 billion, up five percent or US$10.85 billion, and import value reached nearly US$210.3 billion, up 0.3 percent or US$661 million. These import, export results yielded a trade surplus of approximately US$19.5 billion.
The US-China trade war has benefited Vietnam’s trade as many multinational groups and Chinese companies have shifted manufacturing activities to Vietnam in order to take advantage of its skilled, low-cost workforce and extensive free trade agreements.
According to Intel Products Vietnam General Manager Kim Huat Ooi, Intel has invested more than US$1 billion in Vietnam and generated over 5,000 jobs for local workers. Intel’s chip manufacturing facility in Vietnam supplies global markets and the group will continue expanding operations in the Vietnamese market. In fact, Intel chose to invest in Vietnam rather than in China, India and Thailand, due to the stability of its market, preferential policies and adequate infrastructure.
Vietnam has focused in recent years on developing infrastructure and logistics services to facilitate export and draw investment. Recently, Margrethe Maersk, one of the world’s largest container ships, successfully docked at the Cai Mep International Terminal (CMIT) in the southern province of Ba Ria-Vung Tau. In the past, such large ships often chose other terminals in the region, the Port of Singapore for example, but nowadays Vietnam has become their port of choice, reflecting the positive signals of Vietnam’s exports that promote demand for marine transportation. Vietnamese goods can now be shipped directly to buyers, saving time and enhancing Vietnam’s competitiveness as an exporter.
The only ASEAN country set to grow in first half of 2021
Although some ASEAN countries are forecast to see strong recovery in 2021, Vietnam will possibly be the only economy to grow in the first half of next year. However, unexpected factors could have considerable impacts on Vietnam’s competitiveness in the long run.
Explaining Vietnam’s success, economists say the fact that the Vietnamese economy is less dependent on the tourism service sector than other Southeast Asian countries, so the Covid-19-induced collapse of the global tourism industry has affected the Vietnamese economy less.
Moreover, Vietnam has seen strong growth of foreign direct investment inflows during the past two years. The EU-Vietnam Free Trade Agreement (EVFTA) took effect on August 1, 2020. Recently, the Vietnamese government presided over the signing ceremony for the Regional Comprehensive Economic Partnership (RCEP) Agreement which is forecast to create impetus for economic growth and trade for Vietnam in particular and other RCEP signatories in general. Vietnam is expected to benefit greatly from these free trade agreements, said Dr. Tran Du Lich, member of the Prime Minister’s Economic Advisory Group.
While most other countries are struggling with economic recession due to the Covid-19 pandemic, the Vietnamese economy is taking firms steps towards international integration. Vietnam’s GDP is expected to grow 2.4 percent in 2020 and continue its strong recovery in 2021 with a growth rate of 6.5 percent when domestic and foreign trade returns to normal. Vietnam’s decisive actions in preventing recession and controlling the pandemic have been a major driving force of its economic growth in 2020, which is forecast to increase further in 2021.