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Experts identify two factors that help Vietnam recover its economic growth

21/07/2020

According to McKinsey & Company, there are two factors that can help Vietnam's economy gradually overcome the difficult period caused by the pandemic.

Although the ongoing worldwide pandemic of coronavirus disease (COVID-19) has caused a reduction in Vietnam's economic growth, next year this Southeast Asian country may soon regain its pre-pandemic growth.

Above is the statement of McKinsey & Company Global Management Consulting Company in the report posted on Consultancy.asia on July 14.

According to McKinsey & Company, there are two factors that can help Vietnam's economy gradually overcome the difficult period caused by the pandemic.

The first factor is that Vietnam has successfully controlled the disease with no new cases in the community in the last two months. Vietnam is the first country to reopen the economy after 3 weeks of closure in an effort to prevent the spread of the novel coronavirus (COVID-19).

The second factor is related to the consumer market in Vietnam. Increased spending by the middle class led to a boom in the domestic consumption market. Domestic spending now accounts for nearly 70% of Vietnam's gross domestic product (GDP).

Although in April, more than half of Vietnamese consumers had cut back on spending, the spending cutbacks are mostly being felt in the discretionary-spending category, which accounted for just over 25% of GDP. Meanwhile, spending on essentials, which contributed more than 40% of Vietnam's GDP, maintained during the COVID-19 crisis and is expected to remain stable in the near future.

The McKinsey & Company report highlights that these two factors have helped Vietnam to gradually overcome difficulties in the context of the COVID-19 epidemic crisis that continues to impact the domestic economy through supply disruptions, Vietnam's exports affected as China and other key markets went into lockdown, and a 21 percent drop in foreign-direct-investment commitments in the first three months of the year, etc.

According to McKinsey & Company, Vietnam can completely restore economic growth only when international trade accelerates. However, the company also pointed out many factors that helped to stabilize Vietnam's economy during this crisis.

Vietnam's GDP growth in the first quarter of 2020 reached nearly 4%, the lowest level since 2011. But compared to many other economies, this is still a promising growth. Moreover, when the global economy is open, the Vietnamese market will have a better position than before.

McKinsey & Company emphasizes forecasts that most economies in the world will gradually resume economic activities by the end of this year. However, rapid growth will take place primarily in mid-2021.

According to experts, Vietnam will have a lot of potential to develop and boost the economy during this period provided that the COVID-19 pandemic does not come back. In fact, the Asian Development Bank (ADB), the World Bank (WB) and the International Monetary Fund (IMF) all predict that Vietnam can achieve growth rates of up to 7% by 2021.

 

Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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