Vietnam economic slump yet to hit bottom: experts

Vietnam’s GDP growth in the first half fell to a decade-low of 1.81 percent, showing the economy has been severely hit by the coronavirus pandemic.

"The plummeting figures might not be the worst for this year. They could be worse in the third quarter without a breakthrough in economic activities," said Nguyen Khac Bao, head of the Finance Department at the University of Economics Ho Chi Minh City.

A rising number of large companies terminating employee contracts in June show they are scaling down operations in the second half of the year, he said.

Taiwanese footwear maker Pouyuen Vietnam, the largest employer in Ho Chi Minh City, has let 2,786 workers go after the Covid-19 pandemic hit new orders. Besides, Hue Phong Footwear Jsc has cut its workforce of 4,600 by half while Woodworth Wooden Industries Vietnam laid off 2,000 workers.

The coronavirus pandemic has caused 7.8 million workers to lose their jobs or have their working hours reduced, according to the Ministry of Labor, Invalids and Social Affairs.

Bao said although companies are boosting domestic travel, the shortage of international tourists with deeper pockets will still be a major hinderance to a quick recovery of tourism and aviation in the second half.

This could be the worst year for Vietnam’s economy since it opened its doors to other countries in 1986, he said, adding there are still too many uncertainties to forecast when the economy would recover.

Pham The Anh, chief economist at the Vietnam Institute for Economic and Policy Research (VEPR), said major challenges remain in the last six months as the global market is still impacted by the pandemic.

Vietnam’s trade turnover in the first six months fell 2.1 percent year-on-year to $238.4 billion, in which exports dropped 1.1 percent and imports by 3 percent. This ends over a decade of trade turnover growth.

Anh said as an economy fostering open trade, Vietnam could not remain immune to global downturns when its major trade partners, the U.S., the E.U. and China have all been severely hit by the pandemic.

He added although public investment is expected to help boost growth, disbursement of the state coffers in the first half only met 33 percent of this year’s target.

The government has made efforts to revive the economy, but experts say policies need to be more relevant.

The National Assembly has approved a corporate income tax reduction of 6 percentage points, but Anh said if businesses are able to be profitable this year, they do not really need the tax break.

Workers, however, are most vulnerable during this time, but plans to provide financial support have not reached them due to red tape and municipal authorities avoiding responsibility in disbursing the money, he added.

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

Last year, the economic expansion hit 7.02 percent, the second highest growth figure in the last decade, after a record 7.08 percent in 2018, according to government data.