Increased growth projected for second half of 2020, caution advised

Maintaining positive growth

The Vietnamese government has implemented a variety of measures to overcome difficulties for trade and production activities, contributing to economic growth and ensuring social security. The country’s GDP grew 1.81 percent in the first half of the year compared to a year ago, a relatively encouraging result given the global impact of the Covid-19 pandemic, with annual projections ranging from 2.8 to 4.1 percent.

Nguyen Thi Huong, director-general of the General Statistics Office of Vietnam under the Ministry of Planning and Investment, said the positive GDP result reflect determination to fight the disease and prioritization of people’s health and lives, even at the expense of economic benefits. This is a solid foundation for the Vietnamese economy to sustain growth and avoid contraction, Huong said.

In the first half of the year, agriculture, forestry and fishery increased by 1.19 percent, contributing 11.89 percent to overall growth, while industry and construction rose by 2.98 percent, contributing 73.14 percent and the service sector climbed by 0.57 percent, contributing 14.97 percent. The manufacturing and processing sector was the driving force of the economy in the January-June period with an expansion of 4.96 percent, along with wholesale and retail with a growth rate of 4.3 percent, as well as finance, banking and insurance with 6.78 percent.

Pham Dinh Thuy, director of the Industrial and Construction Statistics Department, said industrial production in the first half of the year recorded the lowest increase of recent years. However, thanks to the effective Covid-19 control as well as trade and production activities gradually returning to normal, industrial production has regained its growth momentum since May.

The number of newly-established enterprises was about 13,700 in June and more than 62,000 in the first six months of the year, an increase of 27.9 percent and a drop of 7.3 percent compared to a year ago, respectively.

Vietnam’s economy to bounce back

Vietnam has completed the government’s dual task of fighting the Covid-19 pandemic and promoting socioeconomic development in the first half of the year. The country has shown signs of recovery and GDP is expected to bounce back in the second half of the year.

Nguyen Thi Huong said GDP growth in the second half of the year would surpass that of the first half, as there is much room for growth, such as public investment disbursement and outstanding loans.

According to a business trend survey conducted by the General Statistics Office of Vietnam, some 49.1 percent of surveyed firms believed business would improve in the third quarter from the second quarter, and 31.5 percent said they expected stable business activity. Meanwhile, 19.4 percent anticipated more difficulties. The private sector was the most optimistic, with 82.6 percent forecasting stable or better business in the third quarter, followed by the state-owned sector and FDI firms at 79.7 percent and 75.9 percent, respectively.

The Asian Development Bank (ADB) forecast the highest 2020 GDP growth rate in Southeast Asia for Vietnam at 4.1 percent, 0.7 percentage points lower than its April estimate, while the World Bank (WB) forecast economic growth of three percent in 2020 and 6.8 percent in 2021. In addition, a Bloomberg survey forecast growth of 2.8 percent this year, compared to a gloomier projection for other ASEAN member nations.

Nonetheless, Vietnam still needs to be cautious in the second half of the year.

To promote growth, the government should speed up public investment disbursement in 2020 and remove difficulties for slowly-disbursed projects, especially key, large-scale and influential ones. In addition, it is necessary to stimulate investment among enterprises manufacturing products for exports to prepare supplies for market re-openings and utilize the opportunities of the EU-Vietnam Free Trade Agreement (EVFTA) which is set to take effect on August 1. In addition, the State Bank of Vietnam should ease monetary policies to support economic growth.