Asian Development Bank (ADB) Country Director for Vietnam Andrew Jeffries (Photo: VGP)
- The Vietnamese Government has responded swiftly to the COVID-19
economic impacts, which was supported by strong fundamentals, thus ensuring the
economy’s resilience, said Asian
Development Bank (ADB) Country Director for Vietnam Andrew Jeffries.
Jeffries made that statement in a recent interview granted to the Vietnam Government Portal (VGP)
regarding Vietnam’s macro-economic prospects amidst the COVID-19 pandemic outbreaks.
Three key drivers of Vietnam's economic
Jeffries highlighted that Vietnam’s economic
growth is expected to growth by 6.7 percent in 2021 and 7.0 percent in 2022 - strong
and steady growth made possible by Vietnam’s success in containing the COVID-19
Inflation will be under control, despite an
expected rise to 3.8 percent this year and 4.0 percent in 2022 due to rising
international oil prices on the global economic recovery and increased domestic
consumption, he added.
The ADB Country Director referred to the drivers
of this growth, including industry, driven by export-oriented manufacturing, increased
investment (private and public investment) given accommodative fiscal and
monetary measures, and expanding trade, thanks to the faster-than-expected
recoveries in China, the US, and Vietnam’s participation in 15 major free trade
agreements involving all advanced economies.
Regarding the Vietnamese Government’s support
packages for enterprises and people affected by COVID-19, he asserted that the
Government has responded swiftly to the COVID-19 economic impacts, which was
supported by strong fundamentals, thus ensuring the economy’s resilience.
The accommodative monetary policy through key
interest rate cuts together with the implementation of credit package and
fiscal support measures have provided breathing space to affected businesses,
including small- and medium-sized enterprises (SMEs).
However, the credit support has been mainly
arranged and provided by commercial banks, said Jeffries, adding that the bulk
of the increases of liabilities have been shouldered by the commercial banks,
but they still have to apply required lending standards, especially when the
balance sheets of affected firms are being deteriorated.
Without risk sharing by the Government, banks
may have been reluctant to provide more loans to affected firms, he emphasised.
A more sustainable long-term strategy is
Mentioning Vietnam’s measures to support
businesses and people to overcome negative impacts of COVID-19, Jeffries said
that the State Bank of Vietnam has instructed the banks to extend the
implementation of credit support measures to the end of 2021.
The Government also allowed extending the
deferral of taxes and landing rental in 2021 to further reduce the shock’s
impacts and support economic recovery, he said, stressing that the long-term
economic recovery is being fleshed out by the Government.
However, he supposed that the support was
mainly in the form of deferral of taxes and land rental, and size of the
support remained modest, as compared with other countries with fiscal support
of up to 15 percent - 20 percent of the GDP, like in France, the UK or
Among others, the emerging long-term economic
priorities after the COVID-19 are the imperatives to build an economy which is
resilient to internal and external shocks which have become more frequent in
recent decades; broad-based that can help reduce disruptive impacts from
external crisis; and digitally able to strengthen economic competitiveness and
efficiency, the ADB Country Director proposed.
An ADB study suggests that there is a huge
impact of COVID-19 on income and poverty of Vietnamese households. For example,
the impact of the pandemic will reduce household per-capita income on average by
9.8 percent, and the poorest income group will suffer a 10.2 percent income
drop, while the poverty rate of households in the poorest income quintile will
rise by 40 percent.
There will be an additional 1.7 million poor
people due to the pandemic, and those living in rural, remote areas and ethnic
minority people will be more severely affected.
Cash transfer in Resolution No. 42/NQ-CP
dated April 09, 2020 assistance for people affected by the COVID-19 pandemic
should be a short-term solution to over income shock, said Jeffries.
A more sustainable long-term strategy should
be to help the poor and vulnerable to diversify their livelihoods through, for
example, short-term vocational training and improved access to microfinance for
establishing new businesses, he suggested.
Recommendations for Vietnam to achieve
In short-term, Jeffries indicated that the
major downside risks are the pandemic re-emerging from new coronavirus variants
and delays in the Government’s vaccination plan.
A faltering global COVID-19 vaccine rollout
could have an immediate impact on Vietnam being able to return to its strong
pre-pandemic growth path given the country’s reliance on external demand.
The fast revival of domestic private
investment may also heighten the risk of asset bubbles if credit is not
channeled to productive sectors.
Meanwhile, in the medium and long-term, main
challenges facing Vietnam include climate change impact, unfinished reforms
(financial sector reform and SOE reform), and low labor productivity, he
The ADB Country Director recommended
Vietnam to reset the growth momentum to achieve green recovery in the
medium-term and green growth in the long-term, given the daunting impact of
climate change on Vietnam in the decades to come.
Strengthening institutional efficiency is the
key to unlock the private sector’s potential to support growth, he said.
Accomplishing unfinished business reforms
(financial sector reform, and SOE reform), improving the quality, transparency,
and enforcement of laws and regulations, and simplifying businesses conditions
are all critical to improve institutional efficiency for private sector
development, Jeffries advised.
He stressed the significance of promoting
digital transformation to improve productivity by investing on education,
technology, and innovation./.