Prior to the fourth COVID-19 wave, Vietnam’s economic indicators all pointed to a solid and thriving nation. Industrial production continued its robust expansion, while retail sales rebounded after two consecutive months of decline.
But the current outbreak is threatening to slow down the economy in May and in the coming months, warns the World Bank.
In its latest Macro Monitoring report, the World Bank showed that Vietnam’s industrial production index increased by 1.1% (month-on-month) and 24.1% (year-on-year). The high y/y growth rate is to a large extent due to the low base effect as production was hit hard by the pandemic-related lockdown in April 2020. The continued expansion also reflected recovering domestic consumption in addition to solid external demand for high-tech manufacturing products.
The most dynamic sub-sectors, according to the World Bank, were the beverage, clothing and home appliances, basic metals, electronics, computers and optical products and machinery. The PMI index rose from 53.6 in March to 54.7 in April, making it the sixth consecutive month of continuous expansion of manufacturing.
Vietnam’s retail sales also grew by 2.3% in April, reflecting the partial recovery of consumer demand from the third coronavirus outbreak in late January. This rebound was driven by 1.9% increase in sales of goods while services also grew by 3.8% month-on-month. However, the overall level of sales was still lower than in January.
And thanks to the robust demand from major trading partners, merchandise trade continued to perform exceptionally well. Expansion of goods exports eased slightly by 3.4% while imports grew by 2.6%. Over the first four months of the year, exports and imports grew by 26% and 31%, respectively. Trade expansion was fueled by the recovery in the US and China, and to a lesser extent by the EU, ASEAN and Korea.
Double-digit year-on-year growth rates were recorded across all major categories with the fastest expansion in machinery, followed by computers and electronics. Footwear, and textiles and garments also showed strong recovery, up by 19% and 10%, respectively.
However, with Vietnam experiencing its relatively worst outbreak since the pandemic began, these positive growth trends may change in May and in the coming months.
The fourth COVID-19 wave has led to a sharp increase in community infections, and has already forced several cities to close schools and reinstitute precautionary health and mobility restriction measures.
“Depending on the magnitude of the outbreak and how quickly the government will be able to bring it under control, domestic economic activities will be affected, especially those in sectors such as tourism, transportation and retail,” reads the World Bank report.
If worse comes to worst, the Vietnamese government may need to consider boosting domestic demand by adopting a more accommodative fiscal policy, and increase its support to affected businesses and households.
Vietnamese leader Pham Minh Chinh remains optimistic, saying the latest wave is now under control nationwide. His announcement on Monday came a day after the country received additional doses of AstraZeneca vaccines from the Covax facility.
As of this writing, the country already received more than 2.5 million doses of COVID-19 vaccine, and has so far inoculated over 977,000 people, mainly frontline workers. On average, Vietnam administers at least 32,000 doses each day.
The prime minister urges the entire nation — public and private sectors — to take a more swift and drastic action to drive the virus away from the borders. Solidarity, he said, will be Vietnam’s main weapon in surviving the current outbreak and in preventing new ones.