World Bank forecasts 4.9 percent GDP growth for Vietnam

06:00 | 22/04/2020 Society

(VEN) - According to Ousmane Dione, World Bank (WB) Country Director for Vietnam, the Vietnamese economy is forecast to begin recovering in the middle of the third quarter of 2020 and achieve an annual growth rate of 4.9 percent. 

world bank forecasts 49 percent gdp growth for vietnam

Short-term risks

Ousmane Dione said that Vietnam’s gross domestic product (GDP) will be adversely affected by the Covid-19 pandemic despite good prospects in the medium term. It’s too early to determine the pandemic’s consequences for Vietnam and the world because these depend on the severity of the disease, as well as government efforts to control it and the behavior of people and businesses.

Covid-19 could have a major impact on the Vietnamese economy in the short term if the pandemic is suppressed quickly, similarly to previous epidemics. Other short-term risks include a further decline in economic activity and global trade flows as Vietnam is one of the world’s most open economies.

In its baseline scenario, the WB forecast that the Vietnamese economy would begin recovering in the middle of the third quarter of 2020 and achieve an annual growth rate of 4.9 percent. In a worse scenario, if the pandemic lasts until the end of the year, Vietnam’s GDP will possibly grow a mere 1.5 percent. In the medium term, growth is forecast to be resumed and reach 7.5 percent in 2021 and around 6.5 percent in 2022 due to higher demand, consolidation of the service sector and gradual rehabilitation of agricultural production. The entire economy is forecast to bounce back after the Covid-19 pandemic is over.

Appropriate response

Jacques Morisset, WB Lead Economist and Program Leader for Vietnam, praised the Vietnamese government’s efforts to deal with the health crisis, protect businesses and manage the state budget, especially its contingency reserve that has been used effectively in the current situation.

However, the WB representative believes the Vietnamese government can do even better by taking care of the nonofficial sector which has no access to support measures in terms of tax or credit. Therefore, in his opinion, the government can reduce electricity, water and telephone use charges or create community jobs, and seek ways to increase foreign currency to stabilize the banking system.

In the short term, appropriate tax policies can be applied. In the medium term, the government should increase budget allocations for localities, prioritizing demand stimulus projects.

After the pandemic is over, the WB believes Vietnam can manage external risks by diversifying commercial markets and improving its competitiveness.

The WB is deploying a fast-track financial support package worth US$14 billion to intensify global efforts to cope with the Covid-19 pandemic and shorten the time required for recovery. Vietnam could access US$50 million of the package.

Nguyen Huong