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|Government retaining prudent stance over 2020 growth targets, illustration photo|
The Ministry of Planning and Investment (MPI) last week revealed a preliminary report on two scenarios on Vietnam’s economic growth for 2020 amid the rampant novel coronavirus crisis, known as n-CoV, hitting the domestic economy.
Under the first scenario, if the epidemic was eradicated in the first quarter, the GDP would likely rise 6.27 per cent on-year, with the climbs of the first, second, third, and fourth quarters being 3.8, 6.55, 7.07, and 6.81 per cent, respectively. Under the second scenario, if the nCoV was controlled in the second quarter, the GDP this year would likely ascend 6.09 on-year, with the growth rates of the first, second, third, and fourth quarters being 3.8, 5.81, 7.05, and 6.81 per cent, respectively.
Thus, it will be challenging for the economy to reach the growth target of 6.8 per cent this year. It is likely that such a target will not be feasible, according to the report.
However, Prime Minister Nguyen Xuan Phuc told the government’s cabinet meeting last week on Vietnam’s socio-economic development that despite big losses caused by global economic difficulties and the nCoV, the government “has no plans to revise its growth target,” and “greater efforts must be made to reach the set target.”
The National Assembly last November adopted the growth target of 6.8 per cent for 2020, but the government expects that the rate will be at least 7 per cent, which is almost the same as 7.02 per cent recorded last year.
“In the first quarter, we may see a 1 per cent reduction in economic growth as per the initial estimate. If the Chinese economy’s growth declines strongly, it will continue affecting Vietnam,” PM Phuc stated, ordering ministries, agencies, and localities to take solutions to help businesses in production expansion.
“We can see that in January local and foreign investors are showing strong confidence in the economic outlook. Ho Chi Minh City has seen a $1 billion-registered project. In the northern province of Hai Duong, there have been solutions for developing supporting industries for big groups,” he said. “In 2019, the country’s total foreign direct investment (FDI) reached a record level and more new enterprises were established.”
According to the MPI, in 2019, the total registered FDI hit a 10-year record of $38 billion, up 7.2 per cent on-year, and total disbursed FDI hit a record of $20.4 billion, up 6.7 per cent on-year.
Over the past month, the nCoV outbreak, originating in China’s Wuhan city, has affected many economies globally, including Vietnam.
From last week, the Asian Development Bank (ADB) and the World Bank in Vietnam began gathering economic experts to reassess the global economy and Vietnam’s economy currently affected by the health crisis. Experts said that the outbreak could take a toll on the country’s economic growth this year.
It is expected that the ADB will revise Vietnam’s economic growth, which was earlier forecast by the bank to be growing 6.8 per cent this year. It is also likely that over the next few weeks, a new forecast for Vietnam’s economic outlook from the ADB will be made.
Also, after the reassessment, especially that of China, a final impact report on Vietnam’s economic outlook from the World Bank may be released. Recently, the World Bank forecast that the country’s economy may climb 6.5 per cent over the next three years. This baseline scenario assumes that the Vietnamese export sector will only be moderately affected by the slowdown in global markets.
Experts from Spanish global economic analysts FocusEconomics stated in a recent report on Vietnam’s economic prospect sent to VIR that the country’s economy may grow 6.6 per cent this year and 6.5 per cent in 2021 due to a series of factors such as domestic banking vulnerabilities and possible US tariffs, as well as epidemics like African swine fever.
Vietnamese trade with bordering China remains huge. In 2019, Vietnam’s export turnover from China was $41.5 billion – occupying 15.75 per cent of Vietnam’s total export turnover, and import turnover from this market hit $75.3 billion, accounting for 20.7 per cent of the country’s total import turnover.
Bloomberg News painted a grim picture of the economic fallout from the deadly nCoV epidemic. It said that an interconnected global economy is feeling the strain of China’s viral outbreak, and a potential $160 billion hit in lost growth may be on the way.