THE DAWN OF A CRISIS
While Vietnam has experienced an unprecedented boom in recent decades, Covid-19, or rather the economic crisis that followed the global reactions to it, was a real game-changer. The effects of the crisis, into which Vietnam has fallen completely through no fault of its own, were visible to the naked eye, especially in the sector of hospitality and tourism. Foreign trade, investments and the not negligible remittances from Viet Kieu also put pressure on the economy. In spring 2020, it was not yet clear whether Vietnam would be able to master this Herculean task.
VIETNAM’S CRISIS MANAGEMENT IN 2020
As we can judge in retrospect today, Vietnam’s crisis policy was extremely successful.
Through a swift, courageous, but also prudent response, the Vietnamese government managed to keep the infection under control. Only 35 people to date have died from Covid-19, most of whom had significant pre-existing conditions.
While other economies around the world suffered a dramatic economic slump, Vietnam’s GDP grew by 4.48% (GSO) in the last quarter of 2020, and by 2.91% (GSO) last year. Contrary to all expectations after supply chains were disrupted, Vietnam’s trade volume increased. The biggest driver were exports with + 6.5% (Imports + 3.6%) (BIDV), which created a trade surplus of $19.1 billion.
Of course, there were also setbacks. These include the sharp drop in registered FDI (- 25%), the decline in remittances from abroad and the loss of income faced by around 30 million Vietnamese.
A BALANCED RESPONSE IS STILL IMPORTANT
Every human life counts. However, the essential task for a government remains balancing two essential aspects: The health of the population, and the economic health of the country.
If political leaders only pay attention to the first point (health), the negative effects, for example, the impoverishment of a country, can also lead to deaths. In 2020, Vietnam took all this into account and did not crush the economy. In addition, Vietnam adhered to liberal economic and trade policies without succumbing to the temptations of massive state intervention à la Keynes and MMT. It proved to be the right recipe. Vietnam should continue with it in 2021.
AN OPTIMISTIC OUTLOOK FOR 2021
Although these days the signs are still stormy around the world and many economies are going from one lockdown to the next, the signs for Vietnam remain positive. The country has used the past year to take all the important steps towards repositioning. These include the aforementioned free trade agreements, as well as the positive signs regarding foreign and domestic investors. For this reason, the various forecasts for Vietnam are optimistic. According to BIDV, the global economy will take 2-4 years to recover. However, Vietnam will increase its growth by 6.5-7% in 2021. This gives Vietnam a decent head start – not least in the ASEAN region. However, it will be important that the growth also reaches private households. FDI can play an important role here. They are expected to grow by 30-35% in 2021 (BIDV).
Whether rapid vaccination against Covid-19 is the right way forward for Vietnam, and which of the different vaccines are the most appropriate, remains to be seen. The possibility of a natural worldwide decline in infections also exists – as with other viruses. What remains important is prudent handling of opportunities and risks, as well as a consideration of the overall interests of the people.
Vietnam’s goal in repositioning its economy is not reaching a ‘V-shaped’ curve of improvement (V) like so many other nations hope. Rather, it lies in a ‘square-root’ recovery (√) where the pre-crisis level is not only to be reached but surpassed to continue growing at a higher level. It seems that the efforts and initiatives of the Southeast Asian nation will be a success.
