The GDP plunged in the third quarter, but macro stability and strong prospects for recovery give them reasons to expect a rebound in the last quarter.
More story at Vietnam Insider’s homepage.
The drop of 6.17 percent far exceeded the earlier forecast by lender BIDV’s chief economist Can Van Luc and his analysts. “The third quarter GDP plunge was much deeper than our forecast in early September, showing the major impact of the pandemic especially in the industry-construction and service sectors,” he told VnExpress.
The fourth Covid-19 wave with nearly 775,000 cases to date have given a blow to Hanoi, Ho Chi Minh City and many southern localities where strict social distancing was imposed to curb the spread of the novel coronavirus.
Of 19 southern localities, 18 posted a negative growth in GDP in the third quarter, with HCMC recording a drop of over 20 percent. In the north, Hanoi was the only locality with negative growth.
The stay-at-work model imposed to prevent the spread of the virus has caused factories to suffer.
“Disruption of the supply chain is no longer a threat but a fact,” said Pham Dinh Thuy, head of statistics of industry and construction under General Statistics Office.
If the containment of the outbreak is not done well, there would be even more severe disruptions, he added.
Business registration figures show how difficult it has been for companies to survive. On average in the first nine months, for every four new companies there has been three leaving the market.
This has resulted in a negative growth of 5 percent of the construction-industry sector in the third quarter while in previous years this had been the leading sector of the economy.
The services sector got even more hurt. Retail and services sales in the first nine months plunged 28.4 percent year-on-year.
Some analysts expect public investment to help recover the economy, but in the first nine months less than 50 percent of the target has been disbursed, which has bothered Prime Minister Pham Minh Chinh.
With three months left to spend the remaining 50 percent, this would be a “challenging” task, according to the GSO.
However, analysts still see the light at the end of the tunnel as the government has been able to maintain macro stability.
“Growth is important but the stability of the macro economy is much more important. If there is no stability all the investment channels would see dampening figures,” said Le Anh Tuan, director of strategic investment planning at investment fund Dragon Capital.
Consumer Price Index (CPI), which measures inflation, grew 1.82 percent year-on-year in the first nine months, lowest since 2016.
Foreign direct investment pledges rose 4.4 percent in the period, after suffering a drop of 11 percent in the first seven months.
Vietnam’s changing of strategy to living with Covid-19 is considered a positive move that would impact growth.
“Recovery will be faster than during previous waves thanks to a change in anti-pandemic strategy,” Tuan said.
He added that manufacturing could exceed pre-pandemic figures by the first quarter next year, while for the service sector the same thing could happen by the second quarter.
Echoing him, Luc said the construction-industry and service sector would bounce back stronger in the last quarter after a long period of restrictions.
Vietnam is set to grow 2.5 percent this year if the last quarter’s growth is 5.3 percent, according to the GSO.