Võ Trí Thành
* Võ Trí Thành
The year 2020 was a year like no other. Many unprecedented things happened during the pandemic – the word was named 2020’s word of the year. We’re entering the new year with a new hope despite the fact that COVID-19 transmission is still skyrocketing in many countries.
COVID-19 has turned the world upside down. Grief and sorrow may continue in 2021 but after one year, it’s important to reflect on the last 12 months and anticipate an opportunity to reset for the year ahead.
Việt Nam’s gross domestic product (GDP) was forecast to grow 2.91 per cent in 2020 – the lowest in recent decades. Like other countries, the pandemic had devastating impacts on the country’s economy and society with tens of millions of labourers affected while business closures hit a record high.
However, despite challenges, Việt Nam has been seen as a bright spot in a bleak picture of the world economy. The country is one of the 10 economies with the highest GDP growth in 2020.
When the virus emerged in Wuhan, China in early 2020, many people worried there could have been an outbreak in Việt Nam given it is China’s neighbour, but this did not happen. And when people feared its trade could have been strangled as most of its trading partners were under lockdown, Việt Nam’s trade surplus hit a 5-year high of more than US$19 billion.
The achievements Việt Nam has gained in this “unprecedented time” is testament to the strong resilience of the domestic economy.
Many experts and institutions highlighted Việt Nam’s success in controlling the pandemic as the top reason for the country’s economic success. Yes, but in my opinion, the intrinsic strength of Việt Nam’s economy has been tested in these hard times.
For many years, Việt Nam has focused on strengthening its macroeconomy to maintain stability. Budget deficit continues to be of concern but the Government has also prepared plans to make up for the deficit. Foreign currency reserves are built up every year and inflation is controlled at relatively low levels.
In hardship, the agriculture sector has demonstrated its importance in the economy. Though its contribution to GDP is falling, Việt Nam’s agricultural production has a rather competitive advantage and it was agriculture that supported the economy in difficult times, especially providing a buffer for the informal sector.
Việt Nam is also one of the countries with a high rate of savings which supported domestic consumption during times of falling income. Fortunately, the services sector which was hard hit by the pandemic accounted for a modest proportion in GDP (at around 43 per cent). Production and business activities have been sustained while the growth of commodity exports recovered quickly.
However, Việt Nam’s success in controlling the COVID-19 pandemic is the most important factor that helped stabilise livelihoods, production and consumption as well as backing the recovery after the lockdown was lifted.
In addition, Vietnamese enterprises, though shattered in the pandemic, showed their flexibility in coping with the pandemic, changing business modes and braving challenges.
A General Statistics Office (GSO)’s report in September showed that more than one-third of 152,000 surveyed companies said they have invested in technology, particularly in digital technology, to renovate their management capacity and business approach to customers.
More than half of respondents started to build linkages and connections with others to overcome difficulties together, such as sharing buy orders, allowing bartering for goods and deferred payments. In difficult times, the rate of layoffs was much lower than the rate of revenue drop.
The Government’s supporting policies were also an important factor promptly propping up the economy. Besides the drastic measures to combat the pandemic, the Government has issued many policies to help business and labourers such as deferring taxes and land rent, reducing many business fees, cutting interest rates and promoting credit and investment. Unfortunately, the enforcement has not been done appropriately, decreasing the effectiveness and efficiency of the policy.
Việt Nam’s lessons have demonstrated the significance of building and maintaining macroeconomic stability as a meaningful factor to strengthen the resilience of the economy. The role of the agriculture sector should also be revised towards employing competitive advantages of Vietnamese agriculture production to make it a supportive platform in the crisis.
It’s also important to improve the business environment and expand space for enterprises to do business through which they can have more choices and can learn to innovate business models as well as to transform production methods. It was no coincidence that after four months since the EU-Việt Nam Free Trade Agreement took effect, tens of thousands of certificates of origin were granted to enterprises to enable them to export to the EU.
From the Government’s side, introducing appropriate policies at the right time is not enough, but enforcement is equally important. To a certain extent, the implementation of Việt Nam’s economic policies has not been as strong and consistent as the pandemic fighting policies.
If people talk about the pandemic and braving challenges together in 2020, in 2021 we will look forward to recovery post-pandemic. The APEC 2021 in New Zealand has selected the theme “Join. Work. Grow. Together.” with recovery being a focus in the three main areas, including strengthening economic and trade policies, increasing inclusion and sustainability by building a better society for all people and generating a green recovery and pursuing innovation and a digitally enabled recovery.
In 2021 Việt Nam can have economic growth of from 6.5 per cent to even higher than 7.0 per cent, as predicted by many local and international institutions. It is essential for Việt Nam to recover quickly while accelerating structural and institutional reforms, taking into account the advantages of deepening integration and the digital era as well as uncertainties for appropriate risk management.
*Võ Trí Thành is a senior economist at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. The holder of a doctorate in economics from the Australian National University, Thanh mainly undertakes research and provides consultation on issues related to macroeconomic policies, trade liberalisation and international economic integration. Other areas of interest include institutional reforms and financial systems.