Vietnamese finance officials are downgrading expectations for a recovery of the south east Asian nation’s economy in 2021. The normally fast-growing gross domestic product in 2020 has stalled due to a huge drop in local and global demand, and the absence of international tourism. The booming economy, growing at an average of 6% per year since 2012, will struggle to reach a growth rate of 2% this year.
Fuelled by manufactured exports, the Vietnam economy has dropped back to a trickle. The Asian Development Bank estimates that this year’s GDP growth could be as low as 1.8%. The Vietnamese factories, that usually crank out shoes, garments, furniture and cheap electronics, are seeing dropping demand as the world’s consumer confidence drops dramatically.
Stay-at-home rules in Europe and America are keeping are keeping people away from retail stores. And despite the acceleration of online retail, many of the consumers are emerging from the Covid Spring and Summer with vastly reduced spending power.
The headaches of 2020 are also challenging Vietnam to maintain its reputation as south east Asia’s manufacturing hotspot. Rising costs and xenophobic foreign policy have put China ‘on the nose’ with some governments, complicating factory work in China, whilst other south east Asian countries lack infrastructure and are incurring higher wage costs.
One Vietnamese factory operated by Taiwan-based Pou Chen Group, which produces footwear for top international brands, has laid off 150 workers earlier this year. There are hundreds more examples of the impact of falling demand in the bustling Vietnamese manufacturing economy.
Vietnam’s border closure is also preventing investors from making trips, setting up meetings and pushing projects forward. Those projects in turn create jobs, fostering Vietnam’s growing middle class. Tourism has also been badly affected by the restrictions on travel. “International tourism is dead,” says Jack Nguyen, a partner at Mazars in Ho Chi Minh City.
“Inbound tourism usually makes up 6% of the economy.”
“Things will only pick up only when the borders are open and there’s no quarantine requirements. Who knows when that’s going to be.”
A mid-year COVID-19 outbreak in the coastal resort city Danang followed by the start of the school year has reduced domestic travel, analysts say. Some of the country’s hotels are up for sale as a result.
“Recovery could take 4 years.”
The Vietnamese Ministry of Planning and Investment is now warning that global post-pandemic recovery could take as long as 4 years, perhaps more.
Not that foreign investors in the country are pulling out. Indeed, many are tainge a long-term view that Vietnam’s underlying strengths will outlive Covid-19. Vietnam reports just 1,069 coronavirus cases overall.
SOURCE: VOA News
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