Promoting economic recovery from COVID-19

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VCCI President Pham Tan Cong, Chairman of the Business Cooperation Council in Response to COVID-19, said, Vietnam is facing great difficulties in all economic areas due to the negative impacts of the COVID-19 pandemic. Many southern important economic areas, particularly Ho Chi Minh City and Binh Duong province, had to adopt a long period of social distancing, causing huge damage to the economy. According to the General Statistics Office (GSO), the third-quarter gross domestic product (GDP) was estimated to contract by 6.17% year on year, the deepest shrinkage since Vietnam calculated and announced quarterly GDP growth to date. The country’s GDP rose by just 1.42% year on year in the first nine months of 2021, the slowest growth in more than a decade.

A recent survey conducted by VCCI showed that approximately 94% of businesses were negatively affected by the pandemic, 71% continued to see revenue contraction from a year earlier, 96% witnessed difficulties in customer access, cash flow, labor-management or supply chain, he said. In that context, workers become particularly vulnerable. VCCI’s national survey data showed that 91% of companies had to accept staff downsizing in the complicated epidemic period.

Faced with these enormous challenges, the Government of Vietnam has changed its strategic approach to combat COVID-19. On October 11, 2021, Resolution 128/NQ-CP issued by the Government on "Safely adapting, flexibly, effectively controlling the COVID-19 pandemic" officially took effect, replacing Directive 15, Directive 16 and Directive 19 in pandemic prevention and control. Vietnam has prioritized disease prevention and control, but is also determined to end the plague soon, adapt to find a suitable response to the pandemic, maintain business operations and create jobs and livelihoods for people. Vietnam currently has a very fast rate of vaccination, with 64.3 million people having at least one dose of vaccine (of which 34.6 million people were fully vaccinated). Especially, in economic centers such as Ho Chi Minh City, Hanoi, Dong Nai, Binh Duong and Quang Ninh, full vaccination coverage is more than 80%.

“To fight COVID-19 in Vietnam, VCCI has also actively assisted in supporting businesses to safely and flexibly adapt to the pandemic. VCCI quickly established the Business Cooperation Council in Response to COVID-19. This is a special mechanism to connect businesses and trade associations with central, local and international agencies to join forces to respond to COVID-19, reduce losses, and maintain operations, protect businesses, workers and economic activities. The council also promptly reports tough matters related to the COVID-19 pandemic and business operations, and provides guidance and support in response to the COVID-19 pandemic,” he said.

Thailand's experience in business support

According to Mr. Jay Roop, ADB's chief economist in Thailand, all countries in the world have borne the brunt of the COVID-19 pandemic. Thailand's GDP sank 6.1% in 2020.

Thai businesses have also been hard hit. 98% of Thai businesses are small and micro in size and make up about 40% of the country's GDP. Despite being the most vulnerable, they do not go bankrupt thanks to the Government's adoption of fiscal measures and monetary policies. In particular, monetary policies deliver better support to businesses. The Thai government provided a credit of about US$8 billion, also known as "soft" loans, which give businesses an opportunity to access capital up to 30% of their total assets but not exceeding US$1 million.

The Thai government has also exercised measures to postpone debts. Corporate assets (e.g. hotels) will secure their loans aimed for continued operations.

The government and the Bank of Thailand (BOT) have selected businesses for these programs. This is a medium-term recovery measure, expected to help them recover financially.

On fiscal measures, the Thai government slashed tax and extended VAT payment for them in the short term. If overdue, they will be subject to a fine which is lower than previously.

In the medium term, the financial measure adopted by the Government of Thailand is applying a 5% interest rate during this five-year program.

In particular, Thailand has applied a so-called "co-payment" program where consumers pay a part and the Government pays a part in support of the former, especially in tourism (booking hotels and air tickets), thus facilitating economic recovery.

“Given these measures, in 2021, only about 0.3% of Thai small and medium-sized enterprises went bankrupt. More than 99% of vulnerable and fragile businesses do exist,” Mr. Jay Roop said.

For Vietnam, according to Mr. Nguyen Minh Cuong, ADB's chief economist in Vietnam, the country may not have enough time left, although there is available fiscal space to bail out and restore the economy.

As countries have already entered a recovery cycle but Vietnam has just started to introduce and implement strong fiscal policies, it will be late and inflationary pressure will increase as a result, he added. Inflation is forecast to rise on growing price pressures around the world in 2022.

Meanwhile, with nearly 90% of businesses hard hit by the pandemic and 1.8 million people underemployed, pressure for having a strong fiscal policy to support the economy is weighing up.

"The longer it delays introducing policies, the more vulnerable Vietnam will become," he emphasized.