Opportunities and challenges

How has the Covid-19 pandemic affected the Vietnamese economy?

All economic indicators declined in the first seven months of the year, and the Vietnamese economy may face potential risks and unpredictable challenges in the last months of the year. However, the country still has many basic advantages, such as positive GDP growth in the first half of the year, especially in the second quarter; a good reputation and position in the international and regional arena.

According to a recent survey conducted by the Ministry of Planning and Investment’s General Statistics Office of Vietnam, the Vietnam Manufacturing Purchasing Managers’ Index (PMI) increased to over 50 points by the end of June. Only 31.5 percent of manufacturing and processing enterprises expected more difficulties in the third quarter while the number anticipating difficulties in the second quarter was 40.8 percent. The country also saw domestic tourism growth in July. In addition, African swine fever in Vietnam is being controlled and an increase in pig herds in the last months of the year will help pork prices decline gradually.

What solutions are needed to control the pandemic and promote economic growth?

In addition to strictly implementing measures to prevent and control the Covid-19 pandemic and speeding up public investment disbursement, ministries, departments and localities need to implement the government’s support packages. It is necessary to renew the growth model, enhance autonomy and find new growth drivers. Promoting institutional reforms, developing the private economic sector, strengthening scientific and technological application, improving labor productivity, and effectively utilizing the advantages and opportunities created by economic integration are the key factors for Vietnam to develop.

The country needs to diversify cooperation to reduce its dependence on some large economies, expand markets for the garment and textile, leather and footwear, furniture, electronics and agro-forestry-fishery sectors, promote the development of the digital economy, smart cities and logistics infrastructure, and strengthen production and sales of consumer goods.

Together with Vietnam’s success in the prevention and control of the Covid-19 pandemic and the effect of numerous free trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), the country will have opportunities to expand exports and develop supply chains.

The EVFTA provides opportunities for exports

How should Vietnam develop supply chains and limit disruptions?

To limit supply chain disruptions, it is necessary to harmonize interests in imports and distribution of goods, and develop the domestic market and new supply chains. The country should also attach importance to developing e-commerce and logistics infrastructure.

In the current context, the prevention and control of the Covid-19 pandemic play an important role. It is necessary to follow the direction of Prime Minister Nguyen Xuan Phuc at the regular cabinet meeting for July, including zoning off and warding off infection sources, limiting social distancing, implementing measures synchronously and effectively, especially fiscal and monetary policies to stimulate aggregate demand, ensuring supply chain continuity, maintaining macroeconomic stability, and curbing inflation.