Over the world, the economy is recovering at a faster pace than expected, causing the prices of many goods to increase simultaneously since the supply chain could not keep up with the rapidly increasing trend of world commodity demand. Although trade in goods increased, trade in services has not yet recovered. Countries deeply involved in the supply chain benefit (providing medical equipment, medicines and information technology equipment,...); Countries that rely heavily on services (tourism, hotels) recover very slowly. Therefore, policies that focus on overcoming the crisis continue to be implemented, including: spending on the health care system, fiscal support for vulnerable people, maintaining monetary policy adapting to systematic risk control.

For Vietnam economy, in the third quarter of 2021, economic growth decreased by 6.17% compared to the same period last year. This is the lowest growth rate in the past 10 years. The serious economic decline in the third quarter with heavy socio-economic consequences will take a long time to overcome. The resilience of businesses and people in areas with recent outbreaks of epidemics has approached the tipping point.

According to the third quarter Macroeconomic Report, the success of the economy depends a lot on controlling the epidemic through vaccination and a really large social relief package, along with strong and effective disbursement measures, promoting the digital economy and administrative reform. In this report, VEPR presents two growth scenarios for the Vietnam economy in 2021.

 

In the worse case scenario, when the epidemic is likely to re-emerge, the situation of "opening and closing" the economy will repeat in some places where infection cases appear, causing damage to production. Export orders continue to abandon Vietnam due to the inability to ensure the production schedule, a possible labor shortage, high production costs, and many industries shrink would cause annual GDP growth to only reach 1.0 - 1.5%. In which, the agriculture - forestry - fishery industry grow from 2.0 - 2.5%; industry and construction grow by 3.0-3.5% and services would experience a negative growth from negative 1.0 to negative 0.5%.

In the good scenario, the assumption is made when the whole country has agreed on measures to adapt to the epidemic and still ensures that the production and circulation of goods are not disrupted. The production and consumption activities are restored, the economic centers complete the vaccination plan, the GDP growth of the whole year is forecasted to reach from 2.0 to 2.3%. In which, the agriculture - forestry and fishery sector is forecasted to grow by 2.7 - 3.2%; industry and construction 4.0 - 4.5%; service sector grow 0 - 0.5%.

The report stated that the transfer of orders out of Vietnam by some FDI enterprises or the departure of workers from production centers may only be temporary. The prospect of economic recovery therefore depends greatly on the strategy to deal with the pandemic in the coming time. During the first half of October, the epidemic subsided in many areas, the vaccination coverage rate was quite high in economic centers. The Government also took drastic actions to restore activities. The production and business activities of enterprises and individuals are moving towards the new normal state, but many businesses have not been able to return to normal operations, many passenger and freight traffic activities are still suspended.

Therefore, the Report makes a number of important policy recommendations, including:

Economic activities need to be "untied" to return to normal activities. It is necessary to focus on removing difficulties, obstacles and drastic solutions to facilitate the business sector to return to production and business activities in the fastest and most effective way. Prioritize solutions to ensure the input factors for the restoration of production, especially energy. Accordingly, the power supply to factories needs to be ensured, especially in case businesses have the need to increase production shifts to compensate for the recent difficult time. Although the role of the support package is essential, instead of focusing on the size of the monetary support packages, allowing businesses to operate at 100% capacity early is a meaningful support package. most meaningful and within the reach of the Government.

Besides changing the "openning" strategy to effectively adapt to the pandemic, social and fiscal support also plays an important role in the recovery of the economy. The support packages so far are very limited and the impact is not really positive, not creating confidence for businesses and especially employees.

Vietnam may temporarily accept a higher-than-normal budget deficit in order to secure the people and support businesses to resume production activities. However, once the pandemic is over, fiscal disciplines need to be strictly adhered to again to avoid long-term fiscal and public debt risks.

To support economic growth, localities across the country need to drastically, consistently and synchronously implement the Government's Resolution No. 128/NQ-CP promulgating the provisional regulation "Adapting safely and flexibly control measures of the COVID-19", must not create inconsistencies in the application of epidemic prevention and control policies. The most urgent and short-term measure is to make it easier for people to trade goods and travel to welcome the year-end shopping season. Because this is the occasion when the total demand of the economy increases causing the rise in investment and consumption in the last quarter of the year. In addition, provinces, cities and areas need to implement drastically, consistently, synchronously and flexibly in applying the contents of Resolution 128 of the Government recently issued. Particularly, areas with positive epidemic situation such as Ho Chi Minh City, Dong Nai, Binh Duong ... should boldly give businesses the right of autonomy and self-responsibility for activities to restore production results along with maintaining anti-epidemic measures instead of providing many regulations and conditions for businesses.

Besides the above short-term solutions, after this epidemic, there will be a reversal in FDI flows in countries around the world, the repositioning of supply chains and global value chains. Therefore, it is necessary to review the business conditions and environment so as not to miss the strong economic recovery taking place in the world, while promoting the comparative advantages and deeper participation of Vietnam in the global economy and global value chain.

For domestic enterprises, lessons have been learned in optimizing local sources of raw materials, fuel and materials, as well as exploiting the domestic market. Vietnam needs to soon find a solution to promote the domestic trade cycle. It needs to make good use of raw materials, fuel, input materials as well as output from the domestic market.