Parts of Asia’s response to the coronavirus outbreak have been heralded in countries harder hit by the current crisis. China constructed makeshift hospitals in days, South Korea implemented widespread testing and contact tracing, while the likes of Singapore, Hong Kong, and Taiwan acted early and fast. Vietnam is another of those to have responded swiftly – and as of 30th April is still yet to record its first death.
The government quickly closed schools and universities and imposed travel bans on those returning from affected areas. Yet despite its best efforts to protect public health, its economy has not been immune to the virus’ impact.
The damage so far
In some respects, the damage to Vietnam’s economy mirrors that seen almost all over the world. Tourism has been hit hard, with flights cancelled, hotel occupancy rates severely down year on year, and large parts of its workforce asked to take unpaid leave. Restaurants, shops, and entertainment venues are also suffering from reduced custom as travellers stay away and residents stay at home.
Vietnam is also heavily reliant on trade and therefore vulnerable to fluctuations in supply and demand. Its manufacturing industry has been slowed by disruptions in East Asian supply chains, while its export markets – notably clothes and textiles – face temporary suspensions from the US and the EU.
As in most nations, the short-term impact looks challenging. Tens of thousands of businesses have already closed, while the value of the Vietnamese Dong has wildly fluctuated.
The first stages of response
Thankfully, the state has already demonstrated its ability to intervene. The State Bank of Vietnam (SVB) cut interest rates in February and asked commercial banks to reduce their interest rates. The government, meanwhile, announced a sizeable stimulus package offering tax breaks, delayed tax payments, and reduced land lease fees for businesses affected by the outbreak.
Further protective measures have been promised – but it remains too early to judge their lasting impact.
An uncertain future
With no confirmed end date to the pandemic, Vietnam, like most nations, faces an uncertain economic future. But there are signs of hope.
Vietnam’s economic growth rate may have declined, yet it’s one of the few in Asia and indeed the wider world to remain positive. The country’s success in curbing the outbreak is likely to boost outside investor confidence, meanwhile. while social distancing measures could help accelerate its digital transformation.
It may also be that concerns over China’s handling of the outbreak lead to more multinationals moving their factories to Vietnam – continuing a growing trend in recent years.