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Wednesday, July 17, 2024

What would become of the economy in the second half?

By Phan Minh Ngoc

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Editor’s note: While waiting for Covid-19 vaccines to arrive, Vietnam should revise her growth scenarios to circumvent its self-inflicted problem of having to achieve high economic growth targets at all costs, argues the author of this article

In its latest release, the General Statistics Office reported that Vietnam’s gross domestic product (GDP) in the second quarter was estimated at 6.61% year-on-year, which is higher than the 0.39% growth rate in Q2-2020, yet lower than 6.73% in the same period of 2018 and 2019. Although the GDP growth rate in the first six months of this year rose 5.64%, higher than the 1.82% level in the same period of 2020, it is lower than that in 2018 and 2019.

Are these figures positive or not? The answer would depend on the benchmarks used in the comparison. If we compare them with the corresponding results in 2020, they are positive and impressive particularly considering the fact that many countries are still grappling with negative growth in the first quarter of this year. As a side note, Vietnam may be the only country that has announced the GDP growth rate of the second quarter to date.

However, put them side by side with the 6% target set for 2021 by the National Assembly as well as the 6.5% being attempted by the Government and you will see that the results are not so rosy, especially when taking into account the low base in 2020 for the comparison. Notably, many countries and territories—such as China, Taiwan, Hong Kong, the United States, Turkey and India, to name but a few—have achieved substantial growth rates this year, which are remarkably higher than Vietnam’s. It is because comparisons are made relying on such a low base.

All considered, how Vietnam’s economic growth in the second half would be like? Will it be strong?

The Ministry of Planning and Investment (MPI) has come up with two growth scenarios for H2. According to the first one, if the pandemic is basically controlled in July, then growth in Q3 and Q4 would be 6.2% and 6.5%, respectively, and the overall growth would be 6% to attain lawmakers’ target. In the second scenario, if the pandemic was put under control in June, the growth for the whole year would reach the Government’s aim of 6.5%.

Without paying attention to whether the MPI forecast is accurate or not, the second scenario is out of the question because the pandemic continues to be spreading in some localities, surpassing the time frame of June. This scenario is also infeasible as indicated below.

As for the first plot, it is unlikely that the pandemic is put under control in July. The prerequisite for such a control so as to prevent

Covid-19 from further spreading relies on the nationwide vaccination plus a decisive factor being all the vaccines in use must be effective to current and future variants of the Coronavirus. Those vaccines, according to calculations by relevant authorities, we will not have them around as we wish until 2022.

While Vietnam has not reached full vaccination for the entire population and managed no effective measures for fighting the wide-spread Covid-19, new outbreaks are inevitable. Therefore, even if the latest resurgence can be contained right in July, it may make a comeback any time in the future and we have no miracle in hand to cope with the virus and its variants.

So, does it mean that we can afford no means or tool with which we can spur economic growth during the last six months of the year? The answer is we do have such a means or tool.

It simply relates to the lowering of growth targets to be achieved this year. More precisely, we have created our own dilemma by setting [fixed] goals many months before, whereas the pandemic’s development is quite unpredictable and vaccination plans are out of reach. By the way, it seems to the author of this article that Vietnam is the only country in the world to still set for herself growth targets and to be determined to achieve them.

Will these measures and tools which help “doggedly reach the dual goal (both putting the pandemic under control and spurring economic growth)” be really of help?

Regrettably, the Coronavirus won’t listen to human orders or willfulness. It leaves us with only two options. We should either terminate/contain it and its variants by using vaccines so that we will spur economic growth; or have to succumb to social distancing/lockdowns/quarantines, which result in economic stagnancy.

We cannot manage to have active supplies of [effective] vaccines. Even when some of them are available, we do not know how to administer them in a way that is rapid and prevents cross-infections as reflected by crowds of people at vaccination sites. Given these shortages of fundamental factors, setting targets too high may only aggravate the situation.

In short, it is likely that Vietnam’s growth in the last six months and the whole year will be lower than 6.5% if we cannot accelerate the pace of vaccination.

However, a positive growth at whatever level in the second half of 2021 would be encouraging and worthwhile if we take into consideration our limited resources and capabilities. Throughout the course of the pandemic which has lasted for a year and a half, the endurance and perseverance of businesses and the people have been tested to the limit. Meanwhile, the Government has yet to be of great help during this time, and resources from the people and the corporate sector have been “mobilized” for the fight against the pandemic!

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