HCMC – Vietnam’s economic growth rate in 2020 is forecast to drop sharply to 4.8% due to the impact of Covid-19, but it will remain one of Asia’s fastest growing economies, according to a recent report from the Asian Development Bank (ADB).
Economic growth decelerated to 3.8% in the first quarter of 2020, from 6.8% in the same period last year. Travel and other restrictions imposed by the government to slow the spread of the virus led to lower domestic consumption.
The manufacturing sector weathered the headwinds early on, but the inventory of input materials, including those that are part of global value chains, is being depleted.
Growth in agriculture stagnated because of lower demand for agricultural exports and severe salinity intrusion in the Mekong Delta region. Growth in services, the sector hardest hit by the pandemic, was halved to 3.2% in the first quarter of 2020, down from 6.5% in the corresponding period in 2019.
However, Vietnam’s slower growth is still expected to be higher than the Asian average of 2.2%, according to the ADB report, which forecasts growth in China at 2.3%, India at 4% and Singapore at 0.2%.
The Vietnamese economy’s fundamentals remain resilient. If the pandemic is contained within the first half of 2020, growth will rebound to 6.8% in 2021 and remain strong over the medium and long term.
“Despite the deceleration in economic activity and the downside risks posed by Covid-19, Vietnam’s economic growth is projected to remain one of the highest in Southeast Asia,” said ADB Country Director for Vietnam Eric Sidgwick.
Drivers of economic growth such as the growing middle class and a dynamic private sector are still robust. The country’s business environment continues to improve, while public spending to combat the impact of the pandemic will likely be raised further.
In addition, the large number of bilateral and multilateral trade agreements Vietnam has signed, which promise improved market access, will help the country’s economic growth rebound.