Economic Watch: Vietnam's GDP outlook in jeopardy as COVID-19 wave rages

Source: Xinhua| 2021-08-09 20:35:40|Editor: huaxia
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HANOI, Aug. 9 (Xinhua) -- Eyeing a 6.5-percent gross domestic product (GDP) growth in 2021, with less than five months to go, Vietnam has yet to overcome its worst wave of COVID-19 infections so far.

As of Sunday, a total of 208,060 domestically transmitted cases had been registered in the country, including 206,490 since April 27, when the wave started.

The southeast Asian country has now gone through 11 consecutive days with a daily increase of COVID-19 cases over 7,000.

As admitted by the country's Ministry of Industry and Trade (MOIT) in a July report, achieving the country's growth target for the whole year will be very challenging, requiring both good control of the COVID-19 pandemic and ensuring production and business activities.

Courtesy of more effective control over COVID-19 earlier this year, Vietnam had been enjoying steady economic recovery from 2020, a year troubled by the pandemic, when its GDP growth rate plunged to 2.91 percent, the lowest over the past decade.

According to Vietnam's General Statistics Office (GSO), in the first half of this year, the country recorded a year-on-year GDP growth of 5.64 percent, well above the 1.82 percent posted in the same period last year.

The industry and construction sector was the main driver, with a growth rate of 8.36 percent against the first half of last year, contributing 59.05 percent to the overall growth.

In terms of trade, Vietnam's total trade volume from January to July this year stood at 373.36 billion U.S. dollars, up 30.2 percent year on year.

However, as the COVID-19 situation in the country suddenly took a turn for the worse in late April with the rampant Delta variant, stringent yet inconsistent epidemic control measures were imposed, slowly putting a halt to the recovery momentum.

In particular, some industrial parks were forced to temporarily cease operation due to clusters of infections, and the Vietnamese capital Hanoi and the southern business hub Ho Chi Minh City (HCMC), the epicenter of the current COVID-19 wave, were both put under extensive lockdown in July with the country's strictest social-distancing rules in place.

According to the MOIT, the new epidemic wave has largely impacted localities with bigger roles in the country's economy and with more businesses in the global industrial chain, such as the northern provinces of Bac Giang and Bac Ninh, homes to a number of industrial parks, the northern port city of Hai Phong, and HCMC.

Data from the ministry showed that Vietnam's index of industrial production in July grew by 1.8 percent month on month and 2.2 percent year on year, marking the slowest pace in seven months.

The number of new enterprises established in July in the country also dropped by 22.5 percent from the previous month, with their total registered capital down sharply by 25.3 percent, according to the GSO.

Surveys from Nikkei and the London-based information services company HIS Markit revealed that Vietnam's manufacturing purchasing managers' index (PMI) was at 44.1 and 45.1 in June and July, respectively, signaling a significant deterioration in business conditions in the manufacturing sector for two months in a row, as a PMI reading below 50 indicates a contraction.

As a result, in late July, the Asian Development Bank has lowered its forecast for Vietnam's GDP growth to 5.8 percent in 2021 from the previous estimate of 6.7 percent in April.

For many Vietnamese, whether or not the country will reach its economic growth target ultimately depends on how the COVID-19 situation is handled.

Le Trung Hieu, head of the National Accounts System Department under the GSO, said that to achieve the economic growth target, Vietnam must post a GDP growth rate of about 7.2 percent in the second half of the year, which would be very difficult "given the very weak internal capacity of the economy and the key economic provinces heavily affected by the pandemic."

According to the Vietnam Institute for Economic and Policy Research, an independent think tank, even if the Vietnamese government could put the epidemic under control in August, the country's economic growth rate in 2021 would reach 5.4 percent to 6.1 percent, still lower than the goal of 6.5 percent.

Trung Thanh, an associate professor at the Hanoi-based National Economics University, said it is almost certain that the target is unachievable, saying that apart from the impacts brought by domestic COVID-19 control measures, the transmission of the Delta variant might also jeopardize the economic recovery of the major economies in the world, which would negatively affect Vietnam's trade and investment attraction.

Currently, vaccination against the coronavirus remains on the top of the list for the Vietnamese authorities. As of Aug. 5, the country had received 18 million doses of COVID-19 vaccines from other countries and international organizations, said Le Thi Thu Hang, spokesperson of Vietnam's Ministry of Foreign Affairs, at a press conference last Thursday.

As of Sunday evening, however, no more than 8.9 million doses had been administered nationwide, over 7 million of which were first doses.

Vietnam reported a new daily high of 9,684 domestically transmitted COVID-19 cases on Sunday. Enditem

KEY WORDS: Vietnam,Economy,COVID,19