A need for critical changes to reviving the economy

As of 11th November, more than 63% of the total population have been vaccinated at least one dose

From Kis Vietnam’s perspective, there are two profound changes in the government’s action that are critical in establishing a solid base for the economy during the COVID-19 crisis.

The first one is an acceleration in the vaccination progress for the time being. It is a key to avoiding another large-scaled lockdown in the future. As of 11th November, more than 63% of the total population have been vaccinated at least one dose, of which 29.8% have been fully vaccinated. Besides, other statistics imply that a large part of the economy is protected against the COVID-19 pandemic. Overall, the number of vaccine doses already distributed over the total population aged 18 or above is already above 100%, at 124%. Regarding the 6 largest provinces contributing to 50% of Vietnam GDP, this ratio reached almost 160%. For the top 21-largest provinces accounting for 80% GDP, the ratio was nearly 160%. It is clear that the economy now has a strong immune system against the pandemic with the high level of vaccination.

Furthermore, the second important change is from the government stance switching to the “living to COVID-19” strategy. To try to avoid inconsistencies in the local government’s response to the pandemic and another potential supply chain disruption that once occurred during the fourth wave, Resolution No. 128/NQ-CP was born as sole guidance for the local government’s response to the health crisis in the future. Given high levels of vaccination, as of 22nd October, all 63 provinces and cities already assessed their COVID-19 risk levels, in which 26 provinces were in the level-1 risk (low risk), the remaining 37 provinces and cities were in level 2 risk (medium risk), and no provinces and cities fell into level-3 and level-4 risk (high risk).

Following the guidelines set under Resolution 128/NQ-CP, production and construction activities are allowed to operate at all risk levels. Furthermore, freight transport is also included in the “allowed-to-operate” list. In other words, this is eliminating a possibility of a supply disruption in the time of health crisis, preserving these important drivers for economic growth and the domestic supply chain. Furthermore, this is also easing operating condition requirements for the service activities, especially the retailing sector, as a step to revive the domestic consumption channel.

Kis Vietnam said that one more necessary change set by Resolution 128 would be that local government must inform people and businesses about changes in COVID-19 risk assessment and social-distancing measures at least 2 days in advance. It helps people, household businesses, and enterprises more proactively in preparing for tightening social-distancing measures and would further reduce the risks of a sudden disruption in economic activities.

Fiscal support also played a role in supporting affected people and businesses during the fourth COVID-19, although its impact seemed to be limit ed. From Kis Vietnam’s point of view, with a lack of preparation for such a prolonged lockdown, the government was buying more time by re-implementing some conventional support measures.

From Kis Vietnam’s calculation, excluding additional investment and support to the health sector due to data unavailability, there was approximately VND133,286bn on-budget fiscal support (2.12% GDP) and VND115,000 deferred government revenue, of various types of support measures, from the government and other government-related enterprises, in which 86.5% or about VND115,286tn (1.83% GDP) of supports took place during the fourth outbreak.

By fiscal support characteristics, the government continued implementing conventional support of reductions for various types of taxes and fees & social security contribution, including VAT & CIT & PIT, of about VND40,800bn (0.65% GDP), making about VND56,933bn direct cash transfer to affected workers and people (0.90% GDP), and directing government-related enterprises to reduce utility bills and cut lending interest rates by VND35,552bn (0.56%).