“Lower domestic consumption and weak global demand caused by Covid-19 have hurt Vietnam’s economy more than expected. But economic growth will be resilient in 2020, in large part due to the government’s success in controlling the spread of Covid-19,” said ADB Country Director for Vietnam Andrew Jeffries.
He added “Economic growth will be supported by the country’s macroeconomic stability, increased public spending, and ongoing reforms to improve the business environment.”
The Asian Development Outlook 2020 Update, ADB’s annual flagship economic publication, says Vietnam’s economy will benefit from the continued diversion of production from China to Vietnam, recovery in the China’s economy, and the implementation of a free trade agreement with the European Union.
Slower-than-normal growth would keep inflation subdued at 3.3 percent in 2020 and 3.5 percent in 2021.
Vietnam’s economic outlook over the medium and long term remains positive. Vietnam’s participation in a large number of bilateral and multilateral trade agreements will help the country’s economy rebound. Vietnam will also likely benefit from the current shifting of supply chains to low-cost countries.
However, ADB warned significant risks still remain. A prolonged global Covid-19 pandemic remains the biggest risk to Vietnam’s growth outlook this year and next year.
Another threat is global trade tensions, which lead to rising trade protection and financial risks that could be exacerbated by a prolonged pandemic, the report says.