Netherlands-Vietnam Chamber of Commerce (NVCC)

Events February 2020

Vietnam’s 2020 GDP growth predicted to slow to 7-year low

Vietnam would be among four economies hardest hit by the Covid-19 outbreak, behind Singapore, Thailand and Hong Kong (China).

The Ministry of Planning and Investment (MPI) has forecast Vietnam’s GDP growth to slow to a 7-year low of 5.96 percent in 2020, indicating a less optimistic outlook compared to its assessment one week ago, local media reported.

Previously, the MPI predicted Vietnam’s GDP in 2020 to grow 6.09 percent in case the Covid-19 (nCoV) is contained by the end of the second quarter, representing a 0.7 percentage points lower than the target set by the National Assembly and nearly one percentage point compared to 2019.

The MPI suggested Vietnam would be among four economies hardest hit by the Covid-19 outbreak, behind Singapore, Thailand and Hong Kong (China).

The latest prediction of the MPI is similar to those of domestic economists.

Pham The Anh, chief economist at the Vietnam Institute for Economic and Policy Research (VEPR), told VnExpress that Vietnam’s economic growth is predicted to be shaved off by one percentage point, while ANZ predicted a decrease of 0.8 percentage points in the first quarter due to the epidemic.

The MPI also estimated Chinese arrivals coming to Vietnam would decline by 2.3 million if the outbreak is controlled by the end of the second quarter, while those from other countries are likely to decrease between 50 percent and 60%.

“As Chinese tourists spend an average of $743.6 each, and international tourists of $1,141, a loss of $5 billion would be incurred if the epidemic persists to the end of June,” said the MPI in its report.

Preliminary assessment from the Vietnam Tourism Advisory Board (TAB) said the damage in the first quarter could be up to $7 billion and exceed $15 billion until the end of the second quarter.

With tourism under pressure from the outbreak, the aviation industry is set to face a similar fate. Before the epidemic, 11 Chinese airlines conducted 240 flights per week to Vietnam, while Vietnam Airlines, Jetstar Pacific and Vietjet operated 72 flight routes to 48 destinations in China with 401 flights per week.

In addition to tourism and aviation, Vietnam’s agricultural sector with high dependence on the Chinese market is facing numerous difficulties.

KB Securities said as consumption in China shrinks due to the outbreak, Chinese imports of goods and products from other countries would be set to decline. Meanwhile, China is Vietnam’s main export market for agricultural products as its imports Vietnamese goods worth nearly $6 billion, accounting for 35 percent of Vietnam’s total exports of agricultural products.

In 2019, Vietnam recorded a trade deficit of nearly $34 billion from China, importing largely phone and electronic parts, and input materials for textile and footwear production. With heavy dependence on input materials from China, Vietnam’s manufacture is set to face a major impact from the outbreak.

A survey conducted by the National Private Economic Development Research Board revealed many enterprises could maintain operation for one more week before running out of input materials.

Cash injection not an answer

Vietnam, however, is not the only country facing pessimistic outlook amid the outbreak of the Covid-19. On the global stage, many countries are using stimulus packages to mitigate the negative impacts. China has rolled out a $174 billion bailout package, comprised of $22 billion injection into Chinese markets to prevent the country’s stocks and currency from falling. Other countries also took a slew of measures to shore up their financial markets.

VEPR expert Pham The Anh said in case of Vietnam, monetary easing would not be feasible due to differences in the structure of economic growth.

A stimulus package would not boost the number of Chinese tourists coming to Vietnam, produce more agricultural goods or provide sufficient input materials for local enterprises, Anh added.

In addition, monetary easing would put upward pressure on inflation, which has been on the rise since the end of 2019 due to African swine fever.

Instead of using monetary policy, Anh said Vietnam should find ways to diversify revenues and pursue a more sustainable economic growth model.

Another solution is to waive visa for tourists from European countries and other important markets such as New Zealand, Canada, to relieve pressure from a decline in the number of Chinese tourists.

As many enterprises are facing difficulties, there should be more supports from the banking system and tax reduction for the business community.

Source: Hanoi Times, 14 February 2020

EU Parliament approves EU-Vietnam free trade and investment protection deals

The EU-Vietnam trade agreement, the “most modern and ambitious agreement ever concluded between the EU and a developing country”, got Parliament’s backing on Wednesday 12 February 2020.

MEPs gave their consent to the free trade agreement by 401 votes, 192 votes against and 40 abstentions. The “most modern, comprehensive and ambitious agreement ever concluded between the EU and a developing country” will contribute to setting high standards in the region, and could lead to a future region-to-region trade and investment agreement, said the Parliament, in an accompanying resolution adopted by 416 votes for, 187 against and 44 abstentions. The agreement is “a strong signal in favour of free, fair and reciprocal trade, in times of growing protectionist tendencies and serious challenges to multilateral rules-based trade”, MEPs stressed.

Vietnam not to cut GDP growth target despite epidemic

The government has decided not to lower the economic growth target despite the possible impacts of the new coronavirus epidemic.

“The impact of the epidemic on economic growth this year is very serious,” Deputy Minister of Planning and Investment Tran Quoc Phuong said at a press briefing Wednesday. 

He presented two scenarios for economic growth after factoring in the epidemic. In the first scenario in which the epidemic could be contained within the first quarter of the year, growth this year could be around 6.27 percent, he said. 

If it takes until the second quarter GDP growth would be just 6.09 percent, he warned. Vietnam’s GDP growth reached 7.02 percent last year.

But these numbers are only current estimates and could change depending on the government’s policies and stewardship of the economy, he said.

Head of the Government Office, Mai Tien Dung, said however that despite the epidemic, “The government will not adjust or lower economic growth and development targets.” Vietnam targeted its GDP to grow by 6.8 percent this year.

Regarding the possibility of providing economic bailout packages to offset the negative impacts of the epidemic, he said this “needs to be considered and depends on many factors.”

“Vietnam’s situation is not that serious yet and so for now it is not being considered. [It will only be considered if] the epidemic situation worsens.”

Phuong said bailout packages are part of the plans proposed by his ministry, but the current priority is to commit resources to preventing and controlling the nCoV epidemic. 

The bailout also depends on many factors such as the availability of resources and the target of the assistance, he said.

Vietnam has so far reported 10 cases of nCoV infection, three of whom have been declared healthy and discharged from hospital.

Heineken Vietnam invests additional US$70 million in Vung Tau factory

source: VNA

The southern coastal province of Ba Ria-Vung Tau has recently allowed Heineken Vietnam Brewery – Vung Tau JSC to increase its investment capital from 312.5 million USD to 381.3 million USD.

With the additional capital, the company expects to raise the annual capacity of its factory in Vung Tau from 610 million litres to 1.1 billion litres in 2020.

In early 2020, the province also granted approval decisions and investment licences to several investment projects, including those of Japan-based Seiko PMC Corporation (28 million USD), SeAH M&H Vietnam (35.3 million USD) and Arakawa Chemical Industries (45.6 million USD).

Last year, Ba Ria-Vung Tau attracted 108 new projects, including 49 foreign-invested ones valued at about 623 million USD, and 59 domestically-financed ones capitalised at 13.13 trillion VND (566 million USD).

During the year, it also allowed 40 existing projects to increase investment capital by 524 million USD.