The Vietnam Institute for Economic and Policy Research (VEPR) has revised down its GDP growth forecast for Vietnam this year to 2.6 – 2.8% for this year from the previous estimate of 3.8% in July, assuming the Covid-19 pandemic is still under control domestically.

Overview of the event. Source: VEPR.

However, in a scenario where the pandemic breaks out again the final months of the year, the economy would probably grow 1.8 – 2% or lower for the whole year, said VEPR’s Chief Economist Pham The Anh at the launch of the think tank's quarterly economic report on October 21.

According to Mr. Anh, factors that would support Vietnam’s economic growth during the remaining months of the year include the EU – Vietnam Free Trade Agreement (EVFTA) and the EU – Vietnam Investment Protection Agreement (EVIPA); faster disbursement of public investment funds; low input material costs as a result of declining global consumption demand and production; a shift in global investment capital to Vietnam as the result of the US – China trade war; and a stable macro-economic environment.

However, a resurgence of Covid-19 in a number of countries across the world, as well as geopolitical tensions between major powers continue to pose major risks to such a country with high level of economic openness as Vietnam, noted Mr. Anh.

Internal issues, including high dependence on the foreign-invested sector for growth, low productivity, and the sluggish privatization process of state firms, among others, are also major weaknesses of the Vietnamese economy, he added.

The VEPR’s chief economist suggested Vietnam give priority to ensuring social security and stabilizing the macro-economic environment, and extend support for enterprises forced to suspend operations or those severely affected by the pandemic.

Giving a more detail look into Vietnam’s key driving forces, economist Can Van Luc said the EVFTA has given Vietnam a much-needed support.

While the country’s exports to the EU declined by 10.3% year-on-year in the first seven months of this year, the decline slowed to 4.6% by the end of September.

Meanwhile, the agricultural sector has been able to maintained a similar growth rate in the nine-month period to that of last year (1.84%), despite impacts from Covid-19 pandemic and natural disasters.

For 2021, Mr. Luc expected Vietnam to continue pursuing the dual target of both containing the pandemic and boosting the economic recovery.

At a time of crisis, Vietnam should look for new growth drivers namely digital economy or domestic consumption as the current ones such as exports are struggling to overcome the pandemic.

“Any future economic relief package must take into account a long-term view to ensure a better position for Vietnam once the pandemic is rolled back,” Mr. Luc suggested.