In a report published in early August, the Viet Dragon Stock Company (VDSC) lowered its GDP growth forecast for Vietnam in 2021 to 4.0 per cent. The adjustment is quite steep compared to the 5.6 per cent it forecast earlier and is based on production, consumption, and investment indicators being expected to fall sharply due to the pandemic.

“VDSC’s forecast adjustment reflects the impact of tightening policies on many domestic activities and production capacity as well as the impact of enhanced measures to prevent the Covid-19 pandemic,” the report pointed out.

Specifically, the pandemic has severely affected production and processing; an area that contributes more than 70 per cent of national GDP. VDSC estimates that at least 70 per cent of manufacturing enterprises in the south of the country have had to delay production. Strict pandemic control measures have also limited their production and pushed up operating costs, thus reducing production capacity by 40-50 per cent. Due to Covid-19, the number of businesses leaving the market in July rose more than 30 per cent. VDSC said it would lower its growth forecast even more if the situation continues.

Similarly, Standard Chartered and the Asian Development Bank (ADB) have also expressed concern about the recent developments of the Covid-19 pandemic in Vietnam and revised their GDP growth forecasts for 2021 downwards, to 6.5 and 5.8 per cent, respectively. Reasons cited include the slow implementation of vaccination programs and the prolonged social distancing measures in many areas.

Due to the possibility that waves of the Delta variant and other variants will not end soon, VDSC believes that recovery will be difficult not only in 2021 but also in 2022. When 70 per cent of the population have been vaccinated, most economic sectors will then reopen. “So, to reach the ‘new normal’, the key issue for Vietnam right now is to accelerate vaccinations and control the pandemic as soon as possible,” it recommended.

The government and authorities have indeed taken action and identified solutions to control the pandemic and maintain economic growth.