What is the outlook for Vietnam economic recovery?

Dr Daniel Border (right) and Dr Greeni Maheshwari, RMIT University

Vaccination is the best answer to return to normal

Two of RMIT’s School of Business and Management lecturers and researchers Dr Greeni Maheshwari and Dr Daniel Borer stressed that vaccination is the best answer to reignite the suffering economy and return to a normal life.

Dr Daniel Borer emphasises vaccination can help minimise the risks from supply disruptions in industrial parks.

"The rapid COVID-19 outbreak returning has reduced productivity and left factories operating below capacity in the manufacturing industry in Vietnam, where suppliers for many global firms are located," Dr Borer said.

"Vaccination is key to return to full economic activities,” Dr Borer added. "Vietnam would be at a disadvantage if supply chains are disrupted and the country remains closed to foreign businesses as a measure to prevent the virus spread, while other countries in the region open up thanks to successful vaccination.”

Dr Greeni Maheshwari said hundreds of thousands of manufacturing workers getting vaccinated will help maintain production.

“Vaccination will be beneficial for the factories where thousands of workers are working in close proximity,” Dr Maheshwari added. “This vaccination drive will help to fight the virus and ensure the good health of workers which will enhance the production, and boost the economy in general.”

“Many countries including Europe and the United States have put their greatest effort into vaccination, and are now starting to enjoy dramatically decreasing infection rates, and gradual normalisation of life.”

During times of chaos and uncertainty, Dr Maheshwari praised the Vietnamese community for joining hands with the government to fight against the outbreak by funding for vaccination programs.

During COVID-19 vaccination drive, Dr Daniel Borer assessed a challenge that Vietnam now faces is to rekindle the economy gradually but safely while an increasing number of people are vaccinated.

“Herd immunity is said to be reached at 60-80% of fully vaccinated population. If Vietnam waits to achieve herd immunity before restoring the economy, valuable months are lost and more companies might be bankrupt,” Dr Borer said.

“The Vietnamese government could implement a system where businesses having 60% of their staff fully vaccinated, could return to regular operations,” he added. “This micro-management at business level, would allow the re-establishment of operations for an increasing number of companies and reviving the economy while keeping those sectors still restricted where the vaccinated population is known to be less.”

Acceleration of vaccination drive to move forward post-COVID-19

Although most businesses are facing big obstacles, Vietnam’s trade surplus is recorded at about US$370 million in the first five months of 2021, with only a trade deficit of US$2 million reported in May 2021, presented by Prime Minister Pham Minh Chinh in a socio-economic report.

Dr Maheshwari believes Vietnam still remains attractive to foreign investors and its economy is set to return to growth once the acceleration of vaccination campaigns has been completed.

“Although FDI has dropped significantly due to the severe global recession as shown in Figure 1, Vietnam is still an attractive country for investors.

As Vietnam has been successful in showing recovery from the third outbreak and hence given that the fourth wave is controlled, will not have much future impact on the economy,” Dr Maheshwari said.

“The vaccination drive will also help some of the industries like manufacturing and tourism sectors to resume their operations and this will bring positive impact to Vietnam’s GDP growth rate in the coming time.”

Foreign Direct Investment (FDI) to Vietnam (billion USD). Source: TradingEconomics.com

Moving forward to post-COVID-19, Dr Maheshwari said there are some measures to help Vietnam remain the world’s production centre and to attract foreign investment.

“To attract foreign investment in infrastructure some developments like improving sea-port facilities, developing new seaports, continuing the construction of roads, highways, and establishing new economic zones can be enhanced or undertaken,” Dr Maheshwari said.

“Besides, adopting friendly investor policies with reduced bureaucratic hurdles to lessen the time to start a business might boost investors’ intentions to invest in Vietnam.”