Vietnam’s GDP growth is expected to reach 6.9% in 2021, 0.4 percentage points higher than the government target of 6.5%.

This is among three scenarios predicting the highest growth released by the Vietnam Institute of Economics (VIE) at a workshop launching its latest report on the Vietnamese economy on January 19.

The scenarios will depend on the actual global economic situation and Vietnam’s absorptive capacity of foreign direct investment (FDI).

Production of electronic products at Japan-based MTEX company in Ho Chi Minh City. Photo: Cao Thang.

In a baseline scenario, the country’s GDP growth would stay at 5.49% and at 3.48% for a less optimistic one.

Looking back at 2020, VIE’s Deputy Director Le Xuan Sang noted the impacts of the Covid-19 pandemic on the local economy was much severe compared to financial crises in 1997 and 2008.

During these previous shocks, Vietnam’s GDP growth was plunged to its lowest points of 4.77% in 1999 and 5.4% in 2009, but still higher than the 2.91% growth in 2020.

“The Covid-19 impacts, however, could be a temporary one and would not persist for a long period of time like in 1997 and 2008,” he noted.

According to Mr. Sang, a certain number of economic sectors has been beneficial from the Covid-19 pandemic, while there were very few to really emerge unscathed in the past that makes up a major difference  between the current crisis and the past ones.

“The Covid-19 pandemic opens up a golden opportunity for the Vietnamese economy to accelerate the digital transformation process, which have begun in the last few years,” Mr. Sang suggested.

Mr. Sang pointed to a strong growth in edtech, online media and e-commerce, while the banking sector is set to have prioritized the digitalization process three to five years earlier compared to a non-Covid-19 scenario, resulting in a big jump in the use of non-cash payment methods.

Golden opportunity to narrow gap with regional countries

Pham Sy An, Head of VIE’s Macro Economy and Economic Institution Department said in 2021, the Vietnamese government will continue focusing on restructuring the economy towards greater growth quality, especially in solving bottlenecks for growth.

“IT and digital transformation should become drivers for economic recovery, while serving as foundation for higher economic resilience and promoting green growth,” Mr. An noted.

According to Mr. An, Vietnam is having a golden chance to make a breakthrough in economic development by taking advantage of science, technologies and innovation.

“In certain sectors, including 5G network, digital transformation and nano technology, Vietnam is already at the same level of advanced countries,” added Mr. An, noting stronger efforts in economic reform could narrow the development gaps between Vietnam and regional countries.

To realize this goal, it is essential for Vietnam to continue the administrative reform process to improve the business environment and encourage further development of the private sector.

“Private investment is a key to keep up the development of science, technology and science,” stated Mr. An.

To maintain the momentum of digital transformation in Vietnam in the post-Covid-19 pandemic, Mr. Ly Dai Hung from the of VIE’s Macro Economy and Economic Institution Department suggested a soon implementation of the national digitalization strategy along with new economic stimulus packages.

At a time when state resources are limited, Mr. Hung expected the government to prioritize its support for enterprises with high growth potential that could play a key role to enhance the economy’s competitiveness in the long-term.