Vietnam’s good economic performance comes from the resilience of both domestic economy and foreign trade.
At a time when the world economy is expected to contract by at least 4% amidst the Covid-19 pandemic, Vietnam’s is expected to grow by almost 3% in 2020 and then rebound to 6.8% one year later.
“This projection assumes that the Covid-19 crisis will be brought under control, notably through the introduction of an effective vaccine,” noted the World Bank at the launch of its latest economic update report for Vietnam titled “Taking Stock” on December 21.
The report attributes Vietnam’s good economic performance to the resilience of both its domestic economy and external sector. “Beyond the containment of the pandemic by bold, early and innovative measures, the government has also used its fiscal and monetary policies to provide breathing space to the private sector and jump start the recovery,” it added.
For example, public spending started rising again after three years of fiscal consolidation, resulting in a 40% year-on-year increase in the disbursement of the public investment program.
The external sector – the main driver of economic growth in Vietnam over the past decade – has performed exceptionally well since the beginning of the Covid-19 crisis.
The country is on the verge of reporting not only hits highest merchandise trade surplus ever but also an increase in international reserves. The continued inflows of foreign investment and the steady rise in merchandise exports more than compensated for the losses in foreign exchange earnings from decreased tourism activities and shrinking remittances.
The report also suggests that foreign investors have continued investing and/or shifting production activities to Vietnam due to the country’s good management of the pandemic.
Dealing with future challenges
A key question raised by the World Bank in this report is that while the country has been one of the most successful countries in dealing with the Covid-19, how come it could not deal with environmental and climate challenges with the same effectiveness?
“Vietnam is standing at a crossroads of post-Covid-19 recovery. It has an opportunity to set itself on a greener, smarter and more inclusive development path that will bolster resilience to future shocks from both pandemic and climate-related disasters,” said Carolyn Turk, World Bank Country Director for Vietnam.
“The authorities must tackle the environmental and climate challenges with the same sense of urgency as they have done with Covid-19 because the costs of inaction are already visible and will become increasingly irreversible. The recent tropical storms in Vietnam’s central region and rising air pollution in the country’s major cities are good illustration of this fragility,” she stressed.
Two lessons from the successful management of the Covid-19 crisis could be applied to the environmental agenda. The first lesson is that the best way to cope with an external shock is to be prepared in advance and move with early and bold actions. Second, beyond vision and capacity, the ability to embrace innovation and experiments is instrumental to change individual and collective behaviors, which lays at the root of strategies to cope with health and climate threats.
US firms to benefit from Vietnam exports
In response to a question of Hanoitimes regarding how Vietnam could response to US Treasury decision of labeling it as a currency manipulator, Mrs. Turk suggested Vietnam should look for different ways to enhance its economic competitiveness.
As Vietnam is among a handful countries having contained the pandemic early, it is in a favorable condition to attract investment capital and restructure its economy to ensure sustainable growth in the post-Covid-19 period.
World Bank’s lead economist Jacques Morisset added Vietnam should diversify its trade and investment activities, while considering other currencies to build up its foreign exchange reserves rather than the US dollar.
Standing member of the National Assembly External Relations Committee Don Tuan Phong urged the two countries to continue exchanging to address the issue.
“Vietnam-US trade relations are complementing to each other, not one sidedly. In this context, US enterprises would benefit from Vietnamese export items,” Mr. Phong stated.