The Southeast Asian Times


When the Vietnamese economy gets sick

By Son Nguyen
First published in Friday's Tale in the Saigon Times , titled "When the economy gets sick," February 14, 2020

HCMCity: February 15: Symptoms are emerging quickly as unmistakable signs of an approaching illness for the economy, prompting leaders, policymakers and the business community to gather together to hash out a cure.
The coronavirus, which emerged in the Chinese city of Wuhan late last year, has sent devastating ripples to other economies, with Vietnam also taking a hard hit.
Prime Minister Nguyen Xuan Phuc, at a meeting in Hanoi on Wednesday, called for efforts to contain what he termed as equally dangerous viruses, the other one being the economic stagnation.
Numerous outcries are heard these days, from policymakers as well as the business circle, on the adverse impacts felt in Vietnam, as seen in the local media.
The victims are far and wide, like tourism, aviation, transport, trade and agriculture you name it.
As the Vietnamese economy is quickly integrating itself into the world and becoming a part of the global value chain, such impacts are unavoidable.
Tourism, needless to say, is seen as one of the first victims, given travel restrictions worldwide following the outbreak.
China is the biggest source market for Vietnam’s tourism, and arrivals from the northern neighbor have come to a dead halt.
Nguyen Trung Khanh, head of the Vietnam National Administration of Tourism, says in Tuoi Tre that Vietnam’s tourism will likely incur lost revenue of US$5.9-7.7 billion in the next three months, with the number of international arrivals falling by up to 4.7 million, while that of domestic visitors could plunge by up to 15 million.
Khanh gives a breakdown on damages to tourism, saying revenue from accommodation services would fall by US$1.5-1.8 billion, food and beverage sector by US$1.3-1.7 billion, and shopping by US$1-1.3 billion, let alone transport and recreation services.
On a more downbeat note, Vietnam’s Tourism Advisory Board puts the tourism industry’s lost revenue at US$7 billion in the first quarter, which could more than double to US$15 billion if the epidemic is not contained before July, according to
Aviation also takes a direct hit, as air transport between Vietnam and China has also come to a standstill. says 641 weekly flights between the two countries have been suspended, with 240 of them operated by Chinese carriers and the remaining 401 by Vietnamese airlines. Duong Tri Thanh, CEO of Vietnam Airlines, says on the news site that if the outbreak is effectively contained in July as forecast, the total loss caused by the virus to the national flag carrier would still amount to some US$196 million.
Domestic air travel has also plunged, with passengers at Cam Ranh and Danang airports in recent days tumbling by 30 percent to 50 percent against the same period last year, reports, citing a leader of the Airports Corporation of Vietnam.
Meanwhile, border crossings between Vietnam and China have virtually been sealed off for weeks, prompting Vietnam’s farm exports to get stuck along the border.
Dragon fruit, water melon and vegetables fail to find outlets now, and many organizations in the country have come to farmers’ rescue to ease the glut.
The list of victims of the coronavirus is also extended to several other major export earners, such as textiles, footwear, and even phones.
Samsung Vietnam as the key phone exporter in the country fears its export revenue will crash due to the shortfall of parts supplies from China, while LG as another major South Korean investor says its materials for domestic production will run out in two weeks’ time if the outbreak does not abate, according to a report issued by the Ministry of Planning and Investment (MPI).
Similarly, a senior official with the Ministry of Industry and Trade says many major garment makers now only have materials enough for one month’s production.
Nguyen Xuan Duong, board chairman of Hung Yen Garment, is quoted by Vnexpress as saying that the firm will run out of materials by the end of February, and business will shut down if the material supply disruptions are not solved.
From a macroeconomic perspective, many observers and economists cast a gloomy outlook for this year.
According to most forecasts, Vietnam’s gross domestic product growth would be one percentage point lower than the initial target, “but even such a slowdown could still be an upbeat projection,” says Vnexpress.
Pham The Anh, chief economist with the Vietnam Institute for Economic and Police Research, predicts Vietnam’s GDP growth could slow by one percentage point compared to the target, while ANZ suggests GDP may lose 0.8 point in the first quarter alone, according to Vnexpress.
One week ago, the MPI in a report sent to the Government said that in the worst-case scenario where the epidemic lasts until the end of June, GDP would still grow 6.09 percent, or 0.7 percentage point lower than the target assigned by the National Assembly.
However, in its revised report given at the Government meeting this Wednesday, the MPI said the outlook was more somber, with GDP growth expected at 5.96% for this year, Tuoi Tre reports.
All predictions point out the economy is getting sick from the coronavirus outbreak, which requires concerted efforts from all relevant sides to surmount the high challenges.
At the Cabinet meeting on Wednesday, Prime Minister Nguyen Xuan Phuc stressed that it was not time to revise down the growth targets, as it is more important to look for solutions to the menacing problems.
“We have to make efforts to deal with the two types of virus, the first one being the coronavirus and the other one the virus of stagnation,” the Government leader is quoted by Dau Tu as saying at the meeting.
PM Phuc demanded that major economic sectors map out their own measures to ride out the new challenges, while the MPI was assigned to work out a new roadmap with specific measures to ward off business stagnation.
The Government leader suggested that apart from economic solutions, there must be new initiatives regarding institutions and policies to create new opportunities for development.
As the coronavirus is sickening the economy, it is time to take proactive solutions as a cure to minimize the impacts, alongside efforts to contain the outbreak itself.
Criticizing inaction among many sectors using the virus outbreak as an excuse, PM Phuc stressed that “fighting the virus does not mean closing down businesses. Ministries, agencies and localities need to call on all enterprises, workshops, supermarkets and tourist destinations to do business as usual,” according to Dau Tu.

The Southeast Asian Times February 15, 2020
First published in the Saigon Times February 14, 2020