There would be no change to Vietnam’s GDP forecast for 2021, which stands at 6.5% from the previous projection in April, according to the International Monetary Fund (IMF)’s latest World Economic Outlook report.

This came on the back that the IMF has revised down the prospects for emerging markets and developing economies by 0.4 percentage points to 5.2% for this year.

In emerging and developing Asia, the growth forecast has been cut down by 1.1 percentage points to 7.5% against April, which is partly due to a 3-percentage points contraction in GDP outlook for India to 9.5% and 0.3% down for China to 8.1%.

For the ASEAN-5, including Malaysia, the Philippines, Thailand, and Vietnam, the forecast is cut to 4.3%, 0.6 percentage points lower than the prediction in April.

According to the IMF, the emergence of the Delta variant has turned Southeast Asia into a Covid-19 hotspot, forcing countries to adopt strict restriction and social distancing measures that have a negative impact on growth.

Apart from Vietnam, all major economies in the region face a decline in growth forecast, including Indonesia (-0.4 percentage points) at 3.9%, Malaysia 4.7%(-1.8 percentage points); the Philippines 5.4% (-1.5 percentage points); and Thailand 2.1% (-0.5 percentage points).

In this context, Vietnam is poised to remain the fastest growing economy in Southeast Asia this year.

Production at Garment 10 Company. Photo: Pham Hung

The global economic outlook, however, remains unchanged with estimated GDP growth at 6%, as the forecast for advanced economies is revised up, which reflects pandemic developments worldwide.

“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising Covid death tolls,” stated the IMF. 

The IMF, however, warned that the recovery is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.

Gita Gopinath, Chief Economist and Director of the Research Department at the IMF, said the projected global growth for 2022 is estimated at 4.9%, up from the previous forecast of 4.4%.

“But again, underlying this is a sizable upgrade for advanced economies and a more modest one for emerging markets and developing economies,” she noted.

To keep economic recovery staying on track, Gita called for policy effort at the national level to be tailored to the stage of the pandemic, which is to escape the acute crisis by prioritizing health spending, including vaccinations and targeted support for affected households and firms.

“The next step would be to secure the recovery with more emphasis on broader fiscal and monetary support, depending on available space, including remedial measures to reverse the loss in education, and, finally, to invest in the future by advancing long-term goals of boosting productive capacity, accelerating the transition to lower carbon dependence, harnessing the benefits of digitalization, and ensuring the gains are equitably shared,” she concluded.