Vietnam’s GDP is anticipated to grow by approximately 4.8 percent in 2021, a projection slightly lower than the World Bank Group’s initial forecast in December 2020. The impact of the ongoing COVID-19 wave on economic activity is considered a contributing factor to this adjustment, reflecting the economic challenges associated with the recent outbreak.
The latest edition of Taking Stock, the World Bank’s biannual update on Vietnam’s economic performance, underscores the economic setbacks resulting from the recent COVID-19 surge. Government-imposed mobility measures to curb the pandemic have notably affected the domestic economy. July witnessed a significant 19.8 percent year-over-year decline in retail sales, the largest drop since April 2020, and a notable decrease in the Purchasing Managers’ Index. Externally, the merchandise trade balance shifted to a deficit, and foreign investors displayed caution. Industrial zones and supply chain disruptions caused by the renewed COVID-19 wave led to temporary factory closures and production delays for exporters.
Rahul Kitchlu, World Bank Acting Country Director for Vietnam, emphasizes that the trajectory of Vietnam’s economy in the second half of 2021 depends on effectively controlling the current COVID-19 outbreak, successful vaccine rollout, and the efficiency of fiscal measures to support affected businesses and households, stimulating recovery. While acknowledging heightened downside risks, Kitchlu notes that Vietnam’s economic fundamentals remain robust, suggesting a potential convergence toward pre-pandemic GDP growth rates of 6.5 to 7 percent from 2022 onward.
The report recommends addressing the social consequences of the COVID-19 crisis by enhancing the depth and effectiveness of social protection programs. Authorities are urged to monitor potential risks in the financial sector, particularly non-performing loans. Strategic attention to fiscal policy is crucial, striking a balance between supporting economic recovery and maintaining a sustainable public debt level.
Titled “Digital Vietnam – The Path to Tomorrow,” this edition delves into Vietnam’s digital aspirations, accelerated by the COVID-19 crisis. The report emphasizes that becoming a digital powerhouse is not solely determined by technological breakthroughs but relies on effectively leveraging digital technologies developed elsewhere.
The government is central to building Vietnam’s digital capabilities through three key solutions: encouraging skill acquisition among businesses and workers to navigate digital transformation, fostering innovative capacity through competition and financial support for local startups, and promoting information access, quality, and security. Smart government interventions, in collaboration with the private sector and with transparency, are essential to avoid capture by public and private vested interests in these policy directions.
