When the Vietnamese economy
By Son Nguyen
published in Friday's Tale in the Saigon Times , titled "When the
economy gets sick," February 14, 2020
HCMCity: February 15: Symptoms
are emerging quickly as unmistakable signs of an approaching illness
for the economy, prompting leaders, policymakers and the business community
to gather together to hash out a cure.
The coronavirus, which emerged in the Chinese city of Wuhan late last
year, has sent devastating ripples to other economies, with Vietnam
also taking a hard hit.
Prime Minister Nguyen Xuan Phuc, at a meeting in Hanoi on Wednesday,
called for efforts to contain what he termed as equally dangerous viruses,
the other one being the economic stagnation.
Numerous outcries are heard these days, from policymakers as well as
the business circle, on the adverse impacts felt in Vietnam, as seen
in the local media.
The victims are far and wide, like tourism, aviation, transport, trade
and agriculture you name it.
As the Vietnamese economy is quickly integrating itself into the world
and becoming a part of the global value chain, such impacts are unavoidable.
Tourism, needless to say, is seen as one of the first victims, given
travel restrictions worldwide following the outbreak.
China is the biggest source market for Vietnams tourism, and arrivals
from the northern neighbor have come to a dead halt.
Nguyen Trung Khanh, head of the Vietnam National Administration of Tourism,
says in Tuoi Tre that Vietnams tourism will likely incur lost
revenue of US$5.9-7.7 billion in the next three months, with the number
of international arrivals falling by up to 4.7 million, while that of
domestic visitors could plunge by up to 15 million.
Khanh gives a breakdown on damages to tourism, saying revenue from accommodation
services would fall by US$1.5-1.8 billion, food and beverage sector
by US$1.3-1.7 billion, and shopping by US$1-1.3 billion, let alone transport
and recreation services.
On a more downbeat note, Vietnams Tourism Advisory Board puts
the tourism industrys lost revenue at US$7 billion in the first
quarter, which could more than double to US$15 billion if the epidemic
is not contained before July, according to Vnexpress.net.
Aviation also takes a direct hit, as air transport between Vietnam and
China has also come to a standstill.
Vnexpress.net says 641 weekly flights between the two countries have
been suspended, with 240 of them operated by Chinese carriers and the
remaining 401 by Vietnamese airlines. Duong Tri Thanh, CEO of Vietnam
Airlines, says on the news site that if the outbreak is effectively
contained in July as forecast, the total loss caused by the virus to
the national flag carrier would still amount to some US$196 million.
Domestic air travel has also plunged, with passengers at Cam Ranh and
Danang airports in recent days tumbling by 30 percent to 50 percent
against the same period last year, Vnexpress.net reports, citing a leader
of the Airports Corporation of Vietnam.
Meanwhile, border crossings between Vietnam and China have virtually
been sealed off for weeks, prompting Vietnams farm exports to
get stuck along the border.
Dragon fruit, water melon and vegetables fail to find outlets now, and
many organizations in the country have come to farmers rescue
to ease the glut.
The list of victims of the coronavirus is also extended to several other
major export earners, such as textiles, footwear, and even phones.
Samsung Vietnam as the key phone exporter in the country fears its export
revenue will crash due to the shortfall of parts supplies from China,
while LG as another major South Korean investor says its materials for
domestic production will run out in two weeks time if the outbreak
does not abate, according to a report issued by the Ministry of Planning
and Investment (MPI).
Similarly, a senior official with the Ministry of Industry and Trade
says many major garment makers now only have materials enough for one
Nguyen Xuan Duong, board chairman of Hung Yen Garment, is quoted by
Vnexpress as saying that the firm will run out of materials by the end
of February, and business will shut down if the material supply disruptions
are not solved.
From a macroeconomic perspective, many observers and economists cast
a gloomy outlook for this year.
According to most forecasts, Vietnams gross domestic product growth
would be one percentage point lower than the initial target, but
even such a slowdown could still be an upbeat projection, says
Pham The Anh, chief economist with the Vietnam Institute for Economic
and Police Research, predicts Vietnams GDP growth could slow by
one percentage point compared to the target, while ANZ suggests GDP
may lose 0.8 point in the first quarter alone, according to Vnexpress.
One week ago, the MPI in a report sent to the Government said that in
the worst-case scenario where the epidemic lasts until the end of June,
GDP would still grow 6.09 percent, or 0.7 percentage point lower than
the target assigned by the National Assembly.
However, in its revised report given at the Government meeting this
Wednesday, the MPI said the outlook was more somber, with GDP growth
expected at 5.96% for this year, Tuoi Tre reports.
All predictions point out the economy is getting sick from the coronavirus
outbreak, which requires concerted efforts from all relevant sides to
surmount the high challenges.
At the Cabinet meeting on Wednesday, Prime Minister Nguyen Xuan Phuc
stressed that it was not time to revise down the growth targets, as
it is more important to look for solutions to the menacing problems.
We have to make efforts to deal with the two types of virus, the
first one being the coronavirus and the other one the virus of stagnation,
the Government leader is quoted by Dau Tu as saying at the meeting.
PM Phuc demanded that major economic sectors map out their own measures
to ride out the new challenges, while the MPI was assigned to work out
a new roadmap with specific measures to ward off business stagnation.
The Government leader suggested that apart from economic solutions,
there must be new initiatives regarding institutions and policies to
create new opportunities for development.
As the coronavirus is sickening the economy, it is time to take proactive
solutions as a cure to minimize the impacts, alongside efforts to contain
the outbreak itself.
Criticizing inaction among many sectors using the virus outbreak as
an excuse, PM Phuc stressed that fighting the virus does not
mean closing down businesses. Ministries, agencies and localities need
to call on all enterprises, workshops, supermarkets and tourist destinations
to do business as usual, according to Dau Tu.
Asian Times February 15, 2020
First published in the Saigon Times February 14, 2020