There is a high possibility that Vietnam could enjoy a V-shaped economic recovery in case the pandemic ends in the second quarter (Q2), given a combination of effective measures to contain the Covid-19 pandemic and stimulate growth.

Illustrative photo.

Economist Le Xuan Nghia said the economy could expect a boom in private consumption in the post-pandemic period, ranging from tourism, shopping, catering services, to healthcare, among others.

“Once the pandemic is contained, Vietnam’s credibility on the global stage would be enhanced, translating in to growing numbers of foreign tourists and stronger exports," said Nghia.

It is worth noting that in spite of the Covid-19 pandemic, Vietnam recorded an all-time high trade surplus of US$3.74 billion in the first quarter.

Dang Minh Truong, chairman of Sun Group, said as the US's decision to remove Vietnam from its list of areas experiencing widespread or sustained community transmission of Covid-19 would lay a strong foundation for Vietnam to start promoting tourism activities when opportunities arise.

Vietnam’s economy less affected by the pandemic

A report from Vietnam’s leading asset management firm VinaCapital suggested the Covid-19 impact on Vietnam’s economy is severe, but less than other countries.

In the latest World Economic Outlook report, the International Monetary Fund (IMF) forecast the global economy to contract by 3% in 2020. By contrast. in January the organization had forecast a global GDP expansion of 3.3% for this year.

Regarding major global economies, the IMF expected the US economy to shrink 5.9%, the worst since 1946. China is projected to grow 1.2%, the lowest in 44 years, and Japan's contraction could be 5.2%, the lowest in 11 years.

In case of Vietnam, the IMF expected the country’s GDP growth to decelerate to a new low of 2.7% in 2020, but would remain ahead of regional peers such as the Philippines and Indonesia with modest growth rates of 0.6% and 0.5%, respectively. Others like Thailand and Malaysia are bracing for contraction.

According to VinaCapital, such a prediction was down to the fact that Vietnam is one of a handful countries that has “flattened the Covid curve”, with the total number of cases remaining fairly flat over time.

Fitch Ratings predicted Vietnam’s GDP growth at 3.3% this year, while the Asian Development Bank and the World Bank went for more an optimistic scenario with expansions of 4.8% and 4.9%, respectively.

Economic reopening to proceed smoothly

A research paper published by Harvard University economist Robert Barro last month stated Vietnam’s economy is likely to loss a 3.5 percentage points in GDP growth due to the Covid-19 pandemic versus the 6-7 percentage points reductions of other countries in the world.

Meanwhile, consulting firm McKinsey said the global economy could go through a U-shaped economic recovery once the pandemic is contained in the third quarter, which is at a much lower speed compared to Vietnam’s V-shaped recovery. 

VinaCapital attributed Vietnam’s positive economic growth to its effective public health measures and the fact that the Vietnamese government did not completely shut down the economy.

“Despite sharing a border with China, Vietnam has, with a combination of early decisive action, extensive testing, vigorous quarantining and social unity, so far avoided the devastation seen in Europe and the United States,” stated the Deutsche Presse-Agenture (DPA).

Among countries that are planning to reopen their economies based on the fact that the curve of active Covid-19 cases and deaths seems to have peaked, VinaCapital stated the reopening of Vietnam would proceed fairly smoothly.

With no new cases of Covid-19 infection over the last few days, Prime Minister Nguyen Xuan Phuc on April 20 said Vietnam could gradually ease social distancing orders.

However, Phuc requested government agencies to remain cautious and stay focused on the fight against the pandemic.