22 Jun Life After Lockdown: Reopening Vietnam’s Economy
Vietnam has a lot of good things going for it. On 23 April 2020, it was the first country in Southeast Asia to begin easing lockdown measures after successfully controlling the spread of COVID-19. Growth projections of 2.8 per cent this year from the World Bank seem bright compared to the rest of the world. A newly inked Free Trade Agreement with the EU (EUVFTA) is expected to provide an added boost to exports and business activity.
The Singapore Institute of International Affairs (SIIA) held an online seminar on 10 June 2020 with Dr. Can Van Luc, Chief Economist, Bank for Investment and Development of Vietnam (BIDV) and Mr. Doan Huu Duc, Founder and CEO, Vietnam Consulting Group, to discuss Vietnam’s post-pandemic recovery.
The session was moderated by Associate Professor Simon Tay, Chairman of the SIIA. A recording of the session is available as a premium resource for our corporate partners, and a summary of the points discussed can be found below.
“A Star in the Region”
Although first quarter GDP growth in 2020 was only 3.8 per cent compared to 6.2 per cent in 2019, there were still positive signs for Vietnam’s economy. The Vietnamese currency managed to remain relatively stable and inflationary pressures had eased. There had also been a shift in investment opportunities from China and Hong Kong towards ASEAN and India, with Vietnam as a strong beneficiary. There were some signs of economic recovery in six sectors that were likely to drive future growth. These were 1) industrial production, 2) retail of goods and services, 3) exports and imports (especially with China), 4) tourism (mainly domestic), 5) community mobility, 6) education and training activities.
Traffic Jams and Limits to Growth
The return of traffic jams to Vietnam’s streets was a positive sign of business resumption. However, it also alludes to other constraints that might limit Vietnam’s growth potential. The country has struggled to upkeep its infrastructure to meet the inflow of investment projects. There are still issues with airports, ports, power and traffic jams. And Vietnam still lacks skilled labour. The government has pledged post-COVID-19 to focus on public investment, infrastructure projects and in upskilling workers.
Hopes and Fears; Confidence and Caution
Amid COVID-19, start-ups and SMEs began to leverage on the digital economy even more, adapting quickly to provide online services. Due to the lockdown and the halt in industrial operations, pollution took a pause, and the result has been more awareness of environmental issues. The hopes are that these trends will continue especially with Vietnam’s FDI policy focusing on high-tech sectors and clean and green projects.
The biggest fear remains the danger of a second wave of COVID-19 infections, especially if countries around the world tried to reopen too rapidly. The outbreak had been especially painful for farmers in the Mekong Delta, factory workers, and small businesses in the hospitality sector. Great caution will be needed to mitigate the threat to livelihoods.