COVID-19 Impact Assessment: Analysis of the Potential Impacts of COVID-19 on Vietnamese Economy

The outbreak of COVID-19 has brought upon unprecedented challenges, and is expected to have a significant impact on Vietnam's economic development this year. Based on the current situation, we have analysed the pandemic’s potential impact on the Vietnamese economy. Such an exercise is accompanied by a considerable level of uncertainty. Specifically, in the case of COVID-19, projections have been reviewed and re-adjusted every week since the start of the outbreak.

Additionally, Vietnam’s economy is highly dependent upon other economies. As such, the scenarios and projections relating to the effects on the Vietnamese economy are also strongly correlated with the effects on other countries resulting from the COVID-19 outbreak.

We hope this publication can help you and your organisation better prepare, respond and navigate through the uncertainty.

Vietnam’s Current Economic Prospects

Based on the projections that have been readjusted throughout April 2020, Vietnam’s short term economic outlook remains positive.

Vietnam is still being expected to be one of the few countries that will continue to grow in 2020, while the rest of the world is being projected to enter into recession. However, there are considerable variations in the current projections, highlighting the considerable levels of uncertainty that remain in May 2020.

Revision of GDP growth forecast of selected countries due to the outbreak of COVID-19

Following its accession to the WTO in January 2007, a notable trait of the Vietnamese economy over the past decade has been its substantial and increasing interconnection with other economies, via trade and investment. Two of the major drivers that have been essential for the previous growth and economic development are: (1) the level of foreign direct investment in the country, and (2) the country’s capacity for export. >50% of Vietnam’s exports are sent to the United States, China and the European Union and the United Kingdom

The Q1 results so far have displayed mixed results. Vietnam seems to have been able to maintain its overall export levels to its key export destinations. However, we can expect to see more drastic impacts in Q2 and Q3, as these Q1 figures do not yet reflect any downturns in the general economy or in consumption in the United States and in Europe. 

Sluggish Economic Prospects to Come in Vietnam’s Key Export Markets

In the upcoming period, one key driver of the Vietnamese economy will be the effects of the COVID-19 outbreak on the consumption indicators of significant export destinations – specifically, the U.S. and Europe. 

The most recent projections from the WTO, dated April 2020, forecasted an unprecedented decline in global trade, with U.S. and Europe imports being expected to be significantly impacted. 

The most recent industry reports project an unprecedented decline in the consumption of: (1) footwear and apparel; and (2) phones / other related consumer electronics in 2020. Most of the scenarios for these two industries currently appear to project a steady decline in Q2 and Q3 of 2020, with a progressive rebound to pre-COVID-19 crisis demand levels by end of 2020 and into Q1 2021. 

Although Q1 2020 revealed only a slight and limited impact on the Vietnamese economy, the worst may be ahead in Q2 and Q3, since: (1) consumer demand in key export markets is expected to face an unprecedented decline; and (2) there will be stiffer competition from China, with its business returning progressively to normal over Q2. Both of these factors pose considerable threats to Vietnam’s trade balance and its surplus for 2020, and on the path to a smooth return to the pre-COVID 19 situation. 

World merchandise trade volume, 2000‑2022
Ratio of world merchandise trade growth to world GDP growth, 1990‑2020

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Nguyen Luong Hien

Partner, Deals/Strategy, PwC Vietnam

Tel: +84 28 3823 0796