The country will be one of only three nations in Asia that will post positive growth this year, the others being China and Myanmar, according to a World Bank report.
Other economies will contract, with major Southeast Asian economies like Thailand and the Philippines likely to shrink by 7.1 percent and 8.3 percent respectively.
Although its 2.8 percent growth is lower than last year’s over 7 percent, Vietnam is still a bright spot as the global economy is set to contract 4.4 percent, the report says.
Vietnam has been able to achieve this positive growth thanks to early, effective efforts to contain the Covid-19 outbreaks. After three weeks of a national lockdown in April, most industrial and service activities rebounded as domestic consumers and investors regained confidence.
The government’s acceleration of public investment disbursement, which increased by about 40 percent in the first nine months compared to the same period last year, helped support affected businesses and people, the report said.
"The strong management of the Covid-19 crisis has been Vietnam’s best promotional tool, encouraging foreign companies to reallocate their production activities to Vietnam from other countries where their factories are still closed, thus contributing to the country’s robust export performance."
However, Vietnam is still exposed to risks from the pandemic. The increased spending and reduced revenue in the pandemic’s wake has resulted in the government foregoing about $1 billion per month during the second and third quarter this year, the report said.
If such an accommodative policy were to be sustained over a long period, the government would need to identify new sources of funding that would require substantial reforms in the areas of public financial management, tax collection and debt, it added.
The banking sector is set to see an increasing number of borrowers gradually default on their debt, raising the proportion of problematic loans.
Because Vietnam has one of the highest levels of banking credit relative to GDP in the world, close attention should be paid to the risks involved, it added.
About one-third of households saw their income decline between July and August, and the government should pay immediate attention to these victims who are generally not covered by existing social programs and are in danger of being left behind, it said.
The World Bank forecasts Vietnam’s economy to grow by about 6.8 percent next year, assuming that the Covid-19 pandemic will be gradually brought under control.
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