HCMC – The Asian Development Bank (ADB) has revised its forecast for Vietnam’s gross domestic product (GDP) growth this year to 3.8% from 5.8%.
Nguyen Minh Cuong, an economic expert at the bank, said the country’s economic growth had slowed down due to the Covid-19 resurgence. The local media reported that the recovery momentum has been disrupted despite a recovery in the first half of the year.
According to the ADB, the pandemic has also caused a shortage of laborers, leading to agricultural product supply chain disruptions. In addition, the export of farm products may be affected by storms in the second half of the year while anti-pandemic measures imposed on these products will linger to some extent.
Manufacturing sectors that need a large number of laborers have been hit due to a lack of laborers and a drop in output. Therefore, the industry was forecast to grow 5% this year, well below 8.9% in 2019.
The suspension of tourist sites and mobility restrictions will also affect the tourism sector, thus seeing the service sector’s growth drop from 7.3% to 3.3% this year.
Moreover, complicated administrative procedures, especially the travel pass, have hindered the travel of laborers and food supply chains, worsening the impact of the pandemic on the economy.
The prolonged Covid-19 pandemic and extended lockdowns have weakened consumption and investment, hampering Vietnam’s growth prospects, said Andrew Jeffries, Country Director of the ADB in Vietnam.
Nevertheless, he said Vietnam’s economy would recover and expand 6.5% in 2022 if the pandemic is brought under control late this year and 70% of its population is vaccinated against Covid-19 by the second quarter of next year.
The ADB is still optimistic about Vietnam’s mid-term and long-term growth outlook. Its growth can be backed by local demand, the disbursement of public investment, expansion of its export markets thanks to free trade agreements and the global economic recovery.
However, its short-term development prospect is challenging, mainly due to the pandemic, especially if the vaccination coverage does not increase significantly. The growth will also depend on the Government’s supply of essential products, such as food and cash, to residents vulnerable to the pandemic.
The regional lender noted that Vietnam would benefit from a lift of administrative obstacles for enterprises and residents and enhanced digital transformation to improve the effectiveness of anti-pandemic measures and support the economic recovery this year and the next.