Unsurprisingly, the coronavirus epidemic (so-called Covid-19) had a heavy impact on Vietnam’s economic growth as the outbreak hurt key industries such as tourism and retail. The GDP growth in the first quarter of 2020 slowed down to 3.82% (YoY), which is the lowest since the second quarter of 2009. The economic slow-down is expected to deteriorate in the second quarter of the year.
Vietnam’s GDP rose with 3.82% during Q1 2020 (YoY), a major fall from 6.97% recorded in the last quarter of 2019. The growth rate was even lower than the worst-case scenario forecasted by the government, which was set to 4.52%. The moderate economic expansion was mainly driven by industry-construction and service sectors, of which manufacturing was the most significant contributor with an increase of 7.12% (YoY). As an initial estimate, ADB forecasts Vietnam’s total 2020 GDP growth to 4.8%, and the inflation rate to around 3.4%.
During the first quarter, Vietnam’s merchandize export turnover was USD 59.08 billion, an increase of only 0.5% (YoY). The total import was USD 56.26 billion, down by 1.9% (YoY).
Overall, the economy was hit rather heavily during the first quarter, notably in March. In March alone, exports shrank by 12.1% (YoY), while imports fell by 10.1%. Worst yet, international visitors dropped by 63.8% in February and by 68.1% in March (YoY).
To fight the economic slowdown, Vietnam’s government has offered financial support to businesses and employees affected by the Covid-19. The Prime Minister announced the government’s approval on the financial aid package of VND 62,000 billion (USD 2.6 billion) for about 20 million people affected by the pandemic. The Resolution consists of a financial package for those affected by the pandemic and targets six categories of individuals and businesses. Furthermore, Vietnam’s Central Bank has reduced the interest rates since February and requested commercial banks to delay, extend, and reschedule debt payments for affected businesses.
In contrast with the low GDP growth, the CPI in the first three months increased by 5.56% YoY, mostly triggered by hikes of food prices. The Government hopes to take this under control in the next quarter.