The World Bank has lowered its growth forecast for Vietnam this year by two percentage points to 4.8 percent as Covid-19 weighs on the economy.
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“Whether Vietnam’s economy will rebound in the second half of 2021 will depend on the control of the current Covid-19 outbreak, the effective vaccine rollout, and the efficiency of the fiscal measures to support affected business and households, and to stimulate the recovery,” Rahul Kitchlu, the bank’s acting country director for Vietnam, said in a report released Tuesday.
In December the bank had forecast growth of 6.8 percent, but the latest wave of Covid with over 365,000 cases since the end of April has caused it to lower its projection.
In July retail sales fell by 19.8 percent year-over-year, the largest drop since April 2020, while the purchasing managers’ index also declined significantly, it said.
The merchandise trade balance turned into a deficit over the past few months and foreign investors have demonstrated some caution, it said.
The resurgence of the infection has forced exporters to close factories temporarily or delay production.
But the bank assured that while downside risks have heightened, economic fundamentals remain solid in Vietnam, and the economy could converge toward the pre-pandemic GDP growth rate of 6.5-7 percent from 2022 onward.
Credit rating company Fitch Ratings said recently the renewed outbreaks would act as a setback to Vietnam’s recovery and pegged its growth for this year at 6 percent.
The economy grew at an annualized 5.6 percent in the first half of the year.