With the economy in Vietnam now restarting after Covid-19 related restrictions were lifted, attention is now turned to economic recovery and growth. The Vietnamese government last week adjusted its GDP growth for 2020, down from the original target of over 7% for the year. Despite the lowered GDP target, if Vietnam is able to hit the new target, it will be one of very few countries in the region, if not the world, to achieve such growth in 2020. At the beginning of May, the World Bank said in its Vietnam Macro Monitoring report that, despite Vietnam being battered by the coronavirus pandemic, there are signs of speedy recovery in the post-coronavirus period.
The past week spotlight
Vietnam economy hit hard by COVID-19 pandemic: WB
The World Bank cited the Vietnam General Statistics Office’s latest report as saying processing and manufacturing industries were most heavily impacted with 1.2 million jobs affected during the first quarter.
Unemployment among workers 15 years and above also reached a 5-year high, reaching 2.22% at end of March. As many as 18,600 companies temporarily suspended business in the first quarter, up 26% year-on-year.
The export value of the foreign-invested sector – the engine of Vietnam’s exports, grew by only 1.5% compared to 4.4% in the same period last year.
Let’s look at some other related financial and business news during the past week:
1. Covid-19 success could boost post-pandemic FDI inflows
Vietnam’s declining foreign investment inflow will be reversed soon with the government’s drastic anti-pandemic measures proving effective, experts believe. "The drops are only temporary. When investors see that Vietnam has been able to contain the virus, investment will surge," Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises (VAFIE).
FDI attraction in the first four months fell 15.5 percent year-on-year to $12.3 billion, with drops in the number of newly-registered projects and value of stake acquisitions, according to the Ministry of Planning and Investment.
2. Number of newly-established firms in Vietnam down 13.2 pct in Jan-Apr
Nearly 37,600 new firms were formed in Vietnam with a total registered capital of $19.1 billion in the first four months of this year, down 13.2 percent in number and 18 percent in capital year-on-year due to the COVID-19 pandemic.
Average registered capital per new enterprise was 11.8 billion VND (506,400 USD) during this period, down 5.5 percent compared to the same period in 2019, the General Statistics Office (GSO) has said in a monthly report.
3. Ministry proposes extending feed-in tariffs for wind power until end-2023
The Ministry of Industry and Trade has written to the Government proposing extending feed-in tariffs (FITs) for wind power projects until the end of 2023.
According to the prime minister’s Decision 39 on supporting the development of wind power, wind power projects will enjoy FITs until the end of 2021. However, due to the negative impact of Covid-19, many wind power projects have been postponed and will not be completed on time.
5. Patience vital as EU endeavours to reverse fortunes
As France, Italy, and Spain are set to relax coronavirus restrictions, Vietnam-based companies still have to wait a little bit longer to step up their export activities towards the European market.
According to Nicolas Audier, chairman of the European Chamber of Commerce and Industry (EuroCham), it is hoped the continent is now starting to turn the corner in the fight against COVID-19, both thanks to the actions of individual governments and of the EU itself.
6. Many fees slashed to support businesses post-pandemic
The Ministry of Finance has slashed administration fees in numerous sectors to help the economy get back on its feet when the COVID-19 pandemic eases.
Construction companies, travel firms, banks and credit institutions as well as water resource businesses will all be given a helping hand. Reductions range from 20 to 50 percent and took effect from May 5. They will remain in play until the end of the year.
7. Vietnamese SMEs face cash flow problems amid Covid-19
Many Vietnamese small- and medium-sized enterprises (SMEs) are facing cash flow problems triggered by the ongoing Covid-19 pandemic, stated a survey by the Vietnam Chamber of Commerce and Industry (VCCI).
According to the survey, some 85% of SMEs have scaled down their market, resulting in 60% of firms facing cash flow issues. Further, only 50% of businesses can maintain their operations for another six months, while 30% can survive for only three months.
9. No special treatment for support industries: Finance Ministry
The Ministry of Finance (MoF) and the Ministry of Industry and Trade (MoIT) have failed to find common ground with regards to tax policies for Vietnam’s support industry enterprises.
In the latest response to a recent document circulated by the MoIT on solutions to aid the growth of the support industry, the MoF suggested the MoIT remove several key points on possible changes made to the Law on Value-added Tax, Law of Special Consumption and Law on Personal Income.
The COVID-19 pandemic is a constantly evolving global health crisis that is creating a huge range of challenges for individuals and businesses around the world. As governments take unprecedented action to prevent the spread of the virus, businesses are facing an ever-more complex environment to operate within.
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