How Vietnam Contained COVID-19 and Why its Economy Will Rebound
As schools and businesses reopened after the Reunification Day and International Labor Day Holiday, traffic congestion in major cities such as Hanoi and Ho Chi Minh City also returned on Monday morning at the beginning of the workweek. The scene is a stark contrast to several countries around the globe that are in lockdown in a bid to control the spread of COVID-19.
Vietnam lifted its social isolation measures at the end of April 22 but continues to take precautions by limiting the gathering of people and making face mask wearing mandatory. The country has reported 271 cases of COVID-19 as of May 5 with no deaths as yet. Vietnam has managed to achieve this feat by aggressive contact tracing, testing, mass quarantining, timeliness, and the efficient mobilization of state agencies.
Vietnam fought the pandemic early
Vietnam recorded its first two cases on January 28 on flights from China, it then suspended all flights from mainland China on February 1 followed by all international flights on March 25. Visas and visitors were also stopped to contain the spread of the pandemic. All this seems to have paid off, as Vietnam learned and drew from its experience in dealing with the SARS virus in 2003.
With other countries including Singapore and Malaysia reporting cases in the thousands and continuing various forms of lockdowns, Vietnam has done well to weather the storm compared to its peers and other developed nations.
COVID-19 hits economy hard but economy resilient
Nevertheless, like other countries hit by COVID-19, Vietnam’s economy has also suffered significantly over the course of the outbreak. It’s GDP fell to 3.8 percent in the first quarter of 2020, as compared to 6.8 percent in the same period in 2019 as per the General Statistics Office of Vietnam (GSO). In the first three months of the year, almost 35,000 businesses went bankrupt – the first time in decades the number of companies shutting down was higher than newly registered businesses. The International Monetary Fund (IMF) has also projected that the economy will expand to only 2.7 percent this year.
However, the Asian Development Bank (ADB) has forecast Vietnam to be one of the fastest-growing economies in Southeast Asia despite the impact of COVID-19. In its Asian Development Outlook report 2020, it reiterated the country’s economy will bounce back to 6.8 percent in 2021, provided the pandemic is contained.
To help recover the economy, the government has launched a US$10.8 billion credit support package, lowered interest rates, delayed the payment of taxes and land use fees for several business lines. It has further issued financial assistance for employers and employees affected by the pandemic.
The World Bank has further stated that Vietnam’s economy remains resilient and in its report titled East Asia and Pacific in the Time of COVID-19 reiterated that Vietnam benefits from the numerous free trade agreements (FTAs) with labor market conditions favorable.
In this context, we look at key industries important to Vietnam’s economy that are forecast to make a strong come back.
Tourism
Vietnam’s tourism industry has been significantly affected by the pandemic. Saigontourist – a travel company reported a year-on-year drop of 80 percent in customer numbers in February and 90 percent in March resulting in US$21.1 million fall in monthly revenues. With practically no international arrivals since March 25, tourism and related businesses have suffered significant losses.
However, while the situation is unprecedented, tourism is expected to rebound faster and stronger. For example, during Vietnam’s holiday weekend from April 30 to May 3, domestic tourism to areas such as Da Lat, Vung Tau, and Mui Ne increased with traffic choked on roads leading out of Hanoi and Ho Chi Minh City. Hotel occupancies were also higher with some transport operators fined for not maintaining social distancing guidelines inside coaches. Savills Vietnam has noted that tourism will fully recover within six months after the pandemic is contained.
In addition, Vietnam relies heavily on Chinese and South Korean tourists, which accounted for 56 percent of its international arrivals in 2019. This also presents an opportunity, as China and South Korea have largely contained the pandemic. Once international flights resume, it is likely that international arrivals from these countries would first start, helping tourism to recover. If Vietnam is successful in winning its fight against COVID-19 and is viewed as a safe country for travel, tourist number are likely to grow further. The recovery of the industry seems on track with restaurants and coffee shops opening and catering to customers during the holiday weekend.
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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.
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