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Vietnam’s Economy Showed Resilence Despite Covid-19 Pandemic, Economists Say

Diep Nguyen
BizLIVE -

After a sharp dip in the second quarter, when GDP growth registered 0.4 percent (yearover-year [y/y]), growth rebounded a solid 2.6 percent (y/y) in the third quarter, and the economy is expected to expand by 2.8 percent for the entire year.

Vietnam’s Economy Showed Resilence Despite Covid-19 Pandemic, Economists Say
WorldBank economists say Vietnam’s economy has performed strongly in sharp contrast to the gloomy economic developments affecting the world. 
After a sharp dip in the second quarter, when GDP growth registered 0.4 percent (yearover-year [y/y]), growth rebounded a solid 2.6 percent (y/y) in the third quarter, and the economy is expected to expand by 2.8 percent for the entire year. 
While this performance represents a drop of about 4.2 percent compared to the historical trajectory achieved by Vietnam before the COVID-19 crisis, it compares favorably with the results reported in most world economies, including in East Asia Vietnam’s remarkable performance, however, masks some variations across sectors. 
Sectors registered lower rates of growth during the pandemic than pre-COVID period, with industries expanding by 3.08 percent in the first three quarters of 2020, followed by agriculture (1.84 percent) and services (1.37 percent). There have been also significant fluctuations within each sector and over time, as retail sales of goods were up 5.4 percent in the first 10 months of 2020 compared to the same period last year. 
In particular, the food sector rose 9.4 percent; and utensils, tools, and home equipment rose 6.3 percent. In contrast, domestic and international travel registered 30 percent and 80 percent drops, respectively, in the first 10 months of 2020 compared to the same period of 2019, given necessary mobility restrictions.
On the demand side, the drivers of growth are expected to switch from the private to the public sector, while the contribution of exports will be lower than in recent years. While still expanding, both private consumption and investment have been affected by the containment measures, even if they rebounded in the second part of the year. The uncertainty in both the domestic and global contexts has pushed many investors to postpone or even cancel their investment plans as a precautionary measure. 
The contribution of exports has declined but still remained positive in a depressed global trade environment, while imports fell for the first time in recent years. The government has compensated the lower contribution from the traditional drivers by accelerating the execution of its investment program—up by almost 1.7 percentage points of GDP in the first three quarters of 2020.
Below is a proposed deep dive into the factors behind the resilience of the Vietnamese economy.
These include the responsiveness of the domestic sector to the easing of social distancing and mobility restrictions, the exceptional robustness of the external sector in a depressing global environment, and the smart policy response from the government, which has provided breathing space and channeled funds into the economy.

DIEP NGUYEN