World Bank slashes Vietnam’s 2020 economic growth forecast to 4.9% on virus pressure

Coronavirus outbreak leads to the decrease in exports of services including tourism and lower FDI inflows in the coming months. The fiscal deficit will temporary increase in 2020 due to lower revenue, the report says.

Tourism and transportation sectors which have been hit by the pandemic need further support, Ousmane Dione, country director of World Bank Vietnam told a teleconference on Tuesday afternoon.

A slowdown in tourism, hotels, and catering as well as manufacturing sectors could temporarily increase poverty during the first half of 2020.

Vietnam’s first quarter GDP was reported at 3.82%, lowest since 11 years, due to the virus outbreak. However, the pandemic could cost Vietnam 3 - 5 percentage points in 2020, if the government does not have right measures, Ousmane said.

Vietnamese government implementation the social distancing measure to keep people at home to prevent the virus spreading. However, they do not have enough income. The government should have policy to assist them. The pandemic opened an opportunity for Vietnam to upgrade the public health care system as well as the digital infrastructure for a better digital economy, he said.

Foreign direct investment flow to Vietnam began to reduce in March. It is expected that the investment flow will reduce stronger since companies are facing the impact globally.

The GDP growth of Vietnam in the first quarter was estimated a decade-low. However, the achievement is much better than other countries. If the public health crisis lasts longer, Vietnam’s economic growth in 2020 could shrink to only 1.9%, said Jacques Morisset, the World Bank lead economist and programme leader for Vietnam.

In the medium-term outlook, Vietnam’s economy is broadly favorable. The country could manage the above external risks by diversifying its trade flows and improving its competitiveness. Vietnam’s adhesion to several free trade agreements including EVFTA will take effect soon, commented Jacques.

The fiscal consolidation process is projected to continue from 2021 onwards, which will help to further reduce public debt as a share of GDP, said World Bank, which sees 2021 economic growth of Vietnam to rebound back to 7.5 percent and 6.5 percent in 2022.

Vietnam’s economy remains resilient in the first two months of 2020 when exports have expanded by 8.0 percent, FDI inflows amounted to $2.5 billion and retail sales were up by 5.4 percent. With adequate policy buffer in hand, Vietnam appears to be well-positioned to overcome the ongoing health and economic crisis.

► Vietnam’s premier orders nationwide isolation in 15 days, beginning April 1