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Vietnam needs new growth drivers to consolidate economic recovery: WB
The Saigon Times
Saturday,  Aug 1, 2020,07:31 (GMT+7)

Vietnam needs new growth drivers to consolidate economic recovery: WB

The Saigon Times

Workers at a garment company in District 12, HCMC. The World Bank’s latest Taking Stock report suggests Vietnam find new growth drivers to consolidate its economic recovery – PHOTO: THANH HOA

HCMC - The Vietnamese economy remains resilient to the Covid-19 pandemic and is poised to bounce back but it will need new drivers of growth to consolidate the expected recovery, the World Bank stated in its latest Taking Stock report, titled “What will be the new normal for Vietnam? The economic impact of Covid-19”, released on July 30.

The report, which was compiled before the recurrence of Covid-19 that has locally infected over 100 people and killed one as of July 31, states that although the Vietnamese economy suffered due to Covid-19 in the first half of 2020, prospects remain positive for both the short and medium terms.

The World Bank predicted that if the world situation gradually improves, economic activity should rebound in the second semester of 2020 so that the economy will grow at some 2.8% for the entire year and by 6.8% in 2021. With less favorable external conditions, the economy will expand by only 1.5% in 2020 and 4.5% in 2021.

The main challenge for Vietnam will be finding new drivers of growth to consolidate the expected recovery as its traditional sources of growth, including foreign demand and private consumption, are unlikely to return to their pre-crisis levels soon, amid continued uncertainties both at home and abroad.

Covid-19 has also caused a surge in inequality as the pandemic affects businesses and people differently; for example, workers in the service sector have seen a bigger decline in their income than farmers.

“To adapt to the new normal, policymakers must find new ways to compensate for the weakening of the traditional drivers of growth while managing rising inequality,” noted Stefanie Stallmeister, World Bank Acting Country Director for Vietnam.

The report suggests three complementary measures for the Vietnamese Government to help the country avoid the Covid-19 economic trap and return to its historical trajectory of rapid and inclusive growth.

First, it should consider removing mobility restrictions on international travel, gradually and carefully to balance with safety concerns, as the economy is dependent on foreign visitors and investments.

The second measure is to accelerate the execution of the existing public investment program to enhance domestic demand. However, the effective implementation of this action will require significant improvements in the allocation of resources and financial management.

Moreover, it should provide targeted support to the private sector, particularly to the hardest-hit industries such as tourism and manufacturing exports, through a combination of financial assistance and smart incentives.

The country can also exploit several global trends, which have been accelerated by Covid-19, to push ahead its domestic agenda. For example, in a new global trading system, Vietnam can consolidate its existing footprint by developing strategic alliances with countries that also have a low rate of Covid-19-infections and boosting promotion efforts to attract companies planning to diversify their supply chains.

Additionally, the pandemic presents a unique opportunity to move toward a more contact-free economy by promoting digital payments, e-learning, telemedicine and digital data sharing.

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