Vietnam prepares for longer pandemic effects, future growth

06:00 | 24/07/2020 Economy

(VEN) - Economists say Vietnam should come to terms with a decline in its growth rate this year and prepare to maintain and boost growth in the coming years, since the Covid-19 pandemic will likely last longer than expected.

vietnam prepares for longer pandemic effects future growth

The Central Institute for Economic Management’s (CIEM) first half of 2020 economic report mentions two scenarios for Vietnam’s economy in 2020, with growth of 2.1 or 2.6 percent, export value dropping 3.1 or 1.9 percent compared to 2019, average inflation of 4.3 or 4.5 percent, and trade surplus of US$1.7 billion and US$ 2.1 billion, respectively.

Challenges in the remaining months of the year are still global economic uncertainty, especially the possibility of further Covid-19 outbreaks. Massive large-scale support packages without global-level coordination could pose great risks to financial markets, and increase trade tensions among major economies.

Although it will present opportunities, the EU-Vietnam Free Trade Agreement (EVFTA) will confront Vietnamese enterprises with a growing number of trade remedy, tax evasion and origin fraud-related lawsuits in foreign markets. According to the Ministry of Industry and Trade’s Trade Remedies Authority of Vietnam, the number of lawsuits in the first half of 2020 exceeded the total in 2019.

The Covid-19 pandemic could last longer than expected and Vietnam should prepare well for growth in terms of financial and macroeconomic stability, policy and the government performance.

Economists say Vietnam needs to stimulate domestic consumption and ensure efficient support packages for workers. Although the world economy will continue experiencing complicated developments, foreign investment remains crucial for Vietnam, especially in terms of technology, management skills, and value chains, they add.

Vietnamese negotiators need to be patient and perseverant to help the country draw projects and high quality capital sources, helping create an open investment environment. They should also suggest foreign direct investment (FDI) attraction standards to minimize investment incentives based on tax and land-related preferences.

Vietnam needs to continue improving its microeconomic foundation and renovating its institutional system to increase its resilience and risk control.