The World Bank said that Vietnam “has started to suffer from the unpredictable volatility” of the current global financial market because of Covid-19 pandemic and economic growth is likely to decline to 4.9% as well as “increasing the poverty rate in the first half of 2020.”
Amid the surging contagious cases in the world, the World Bank said that “Vietnam is heavily affected by the Coronavirus” in the context of “deep integration with the global economy.”
“In the first few months of 2020, inflationary pressures persist due to high food prices at the end of the year combined with the possibility of goods shortage due to trade restrictive measures to cope with the Covid-19 pandemic. Manufacturing, tourism, and transport industries dropped sharply in the first two months of 2020,” the World Bank said in an updated economic situation report entitled “East Asia and the Pacific during the Coronavirus” released on March 31.
“Vietnam has started to “suffer” from the unpredictable volatility of the current global finance, stock prices plummet, national credit risk increases, and investment capital flows decline.”
The international financial institution further commented that “Vietnam is in a strong position to overcome the ongoing health and economic crisis,” citing the evidence that “In the first two months, exports grew by 8%, FDI inflows amounted to $2.5 billion, retail grew by 5.4%.”
The World Bank believes that although the prospects for Vietnam’s economy are still favorable in the medium term, GDP growth will be negatively affected, and the economy’s growth rate “could be reduced to about 4.9% in 2020.”
In addition, “inflationary pressures are expected to rise temporarily, reflecting uncertainty about food and fuel prices, as well as the potential for trade disruptions.”
“In the context of many households now dependent on wages, including in rural areas, the decline in tourism, hotels and restaurants, production and processing may temporarily increase poverty rate in the first half of 2020,” World Bank said.
“The effort to strengthen the fiscal situation is expected to continue from 2021 onwards, thereby further reducing the ratio of public debt to GDP. In the medium term, growth is expected to return to 7.5% in 2021 and converge around 6.5% in 2022 thanks to improved external demand, strengthened services and manufacturing and restored agriculture. The economy will rebound after the global Covid-19 pandemic.”
Not only Vietnam, according to the World Bank, other East Asian and Pacific countries are also “facing many adverse situations.”
“The region is still recovering from prolonged trade tensions, now has to cope with the complicated outbreak of the coronavirus, and faces the risk of an unprecedented global recession. To overcome this difficult period, countries need to take drastic actions, extensive international cooperation and great support from outside,” the World Bank said.
The specter of the Covid-19 pandemic is also covering Vietnam’s economy.
The latest survey of the Private Sector Development Research Board (Committee IV) on 1,200 businesses on the impact of the coronavirus on business activities shows that, if the pandemic lasts for 6 months, then 74 % of businesses may be bankrupted.
The main reason is that revenue cannot compensate for activities such as salary payment, bank loan interest, space lease … In addition, nearly 30% suffer lost of 20-50% of revenue, 60% of businesses incur loss of even more than half the revenue.
The groups that are seriously and immediately affected are aviation, tourism (accommodation, hotels, dining), education, textiles, footwear, furniture manufacturing …
The Covid-19 pandemic also causes production to be stagnant, trade is limited, agriculture, retail and international capital flows are also “hit.”
Aviation industry lost over $1 billion.
According to the forecast of the Vietnam Aviation Administration, the complicated developments of the pandemic may affect the revenue of Vietnamese airlines about VND25,000 billion in 2020.
In particular, Vietnam Airlines expects revenue to decrease by VND12.5 trillion, Jetstar Pacific expects to reduce income by about VND732.8 billion. Up to now, the industry’s revenue has dropped by VND25 trillion.
According to Duong Tri Thanh, general director of Vietnam Airlines, the pandemic has blown away the airline’s cumulative profits in the past 4-5 years.
“Outbreaks in Korea and Italy made the situation more serious, with many customers leaving. Accumulation of the past 4-5 years has returned to zero,” Mr. Thanh said.
Facing that situation, Vietnam Airlines said it had to negotiate with foreign workers to let them take unpaid leave for a while. “For the time being, foreign pilots take 3 weeks unpaid leave. Vietnamese pilots are also arranged 10 days to 2 weeks off. Along with that, leadership salary is reduced by 40%,” Thanh said.
Due to reduced demand for travel, the young but recently developed “fast” airline thanks to strong financial backing by FLC Group, Bamboo Airways, is also negatively affected by the Covid-19.
“Many Bamboo Airways routes have been reduced or temporarily stopped because of Covid-19,” the airline’s representative said.
Meanwhile, stopping exploitation of Chinese and Korean markets … made Vietjet seriously affected. Although no specific figures were released. Vietjet was more affected by the Chinese market than Vietnam Airlines.
Along with aviation, tourism is among the groups most heavily affected by the pandemic. Sharing at the meeting of Prime Minister Nguyen Xuan Phuc with private economic groups on the morning of March 12, a representative of Sun Group said that entertainment services accounted for 70% of revenue but in the first two months of this year decreased by 2 million visitors and maybe after the first half of the year, the number of visitors decreased to 7 million. In this segment, Sun Group expects to reduce the revenue by VND2 trillion.
In a recent announcement to its partners, Vinpearl Joint Stock Company said that it will temporarily close for nearly one month for two hotels in Nha Trang, Vinpearl Discovery 1 Nha Trang and Vinpearl Condotel Empire Nha Trang, until March 31.
Two other hotels in the Central region will temporarily close are Vinpearl Resort & Spa Hoi An and Vinpearl Resort & Spa Da Nang. Vinpearl has not yet determined the date of reopening but the closing time is determined as “until a new notice is given.”
Similarly are three hotels in Phu Quoc, including Vinpearl Resort & Golf Phu Quoc, Vinpearl Discovery 3 Phu Quoc and Vinpearl Luxury Phu Quoc. Representative of Vinpearl said that it will maintain the infrastructure in the time of temporary closure.
This situation is also not very bright in groups with other services, hotel and accommodation such as BRG, FLC … According to Deputy General Director of Tourism Department Le Hoai Chung, tourism industry of Vietnam is expected to suffer losses of $6 billion-$7 billion in the next 3 months. Many tourism businesses are in a state of “exhaustion” due to lack of tourists.
Tran Duc Hai, director of the Hanoi Department of Tourism, said the Covid-19 epidemic caused a 60% decrease in tourist arrivals to tourist attractions, a 50% reduction in accommodation system, and off-peak days. only reach 30% capacity.
“Hanoi has nearly 3,500 accommodation establishments with nearly 61,000 beds. But with the common difficult situation, these accommodation facilities are facing challenges in business. Many hotels have to reduce staff, reduce salaries of employees, even some places must be closed to preserve capital to avoid further losses,” said the Hanoi Department of Tourism.
Textiles and footwear are assessed as two areas directly affected by the complicated development of the disease due to a shortage of production materials and export. According to calculations, if the raw materials are delayed for half a month, the textile and garment industry alone will lose $1.5 billion-$2 billion.
Similarly, because the components of the industry depend heavily on two markets, China and Korea, enterprises in the field of electronics such as phones and televisions are also “suffering” from the disease.
In addition, the retail sector and international investment flows were also heavily influenced by the Covid-19 pandemic. Accordingly, the disease will affect the psychology of the people, a trend of defense, saving, limiting spending, affecting purchasing power, which will reduce personal consumption in the short term.
While the foreign direct investment sector, in the first 2 months, the capital for implementing foreign direct investment projects was estimated at $2.45 billion, down 5% compared to the same period last year.
Statistics from the Business Registration Administration (Ministry of Planning and Investment) show that in the first two months of the year, there were 16,151 enterprises temporarily suspended business, up 19.5% over the same period last year; 2,807 enterprises completed the procedure for dissolution.
The Ministry of Planning and Investment has reduced its GDP forecast from 6.8% to 5.96% only if the pandemic persists until the second quarter – the lowest level in the last 7 years.
Coronavirus pandemic is expected to persist globally, and Vietnam is also a country that continues to be affected directly and severely as the nation is too close to China – where the dangerous disease broke out first. Therefore, Vietnam’s economy will continue to be devastated, workers will lose their jobs and political instability will increase in the near future.
Trung Nam from Da nang – Thoibao.de (Translated)
