GDP growth to hit 3 pct in 2020: Fitch Solutions

By Dat Nguyen   July 2, 2020 | 12:59 am PT
GDP growth to hit 3 pct in 2020: Fitch Solutions
Workers construct a building in Hanoi in June 2020. Photo by VnExpress/Ngoc Thanh.
Vietnam’s GDP would expand by 3 percent this year with a recovery in the second half as Covid-19 appears to have been contained in the country, Fitch Solutions forecasts.

The market research company, a unit of credit ratings Fitch Group, said in a recent release this is a revision from its previous forecast of 2.8 percent growth.

The recovery is expected to be driven by a resumption of activities in manufacturing, retail, hospitality and transport as social distancing campaigns have been eased since April.

The industry and construction sector, which includes manufacturing, is set to benefit from the EU-Vietnam Free Trade Agreement (EVFTA), which will come into effect in August, and the relocating of companies from China.

However, the extent of recovery in manufacturing will be capped by weak external demand in a global recession, while the barring of tourists from entering the country will continue to hamper a recovery in tourism related services like retail and hospitality, according to Fitch Solutions.

The services sector, which accounts for 42 percent of GDP, is also expected to recover in the second half thanks to an increase in domestic tourism.

Agriculture, forestry and fisheries will not likely bring in major contributions to growth in the second half due to the absence of major supply increases in prior growing seasons, it added.

Vietnam’s GDP growth fell to a decade-low of 1.8 percent in the first half due to coronavirus impacts. A total 7.8 million workers had lost their jobs or had their working hours reduced, with the number of businesses temporarily suspending operations rising 38 percent year-on-year to 29,200 in the period.

Experts have warned that the plummeting figures might not have hit the bottom as challenges remain in recovering the economy in the second half as exporters struggle to find markets and international tourists remain banned from entering the country.

World Bank had earlier forecast Vietnam’s GDP growth could fall to 1.5 percent this year, against 7.02 percent in 2019.

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