Vietnam moves to protect economy as COVID-19 impact strikes

March 12, 2020

HANOI - While Vietnam has been able to contain the spread of COVID-9, initial measurable impacts of the outbreak on its economy have shown up in growth figures for several sectors in the first two months of 2020. Aviation and the tourism industry are those most badly hit. Vietnam's overall Index of Industrial Production (IIP) and manufacturing IIP in 2M2020 slowed to 6.2% YoY and 7.4% YoY vs. 9.2% and 11.4% in 2M2019, respectively.

Meanwhile, retail sales only grew 5.4% YoY in real terms, while 9.3% YoY was recorded for the same period last year.

According to an estimate by the Civil Aviation Authority of Vietnam, the COVID-19 epidemic could take away VND25 trillion (more than US$1 billion) from the 2020 revenue of the country's airlines, with Vietnam Airlines' revenue possibly dropping by VND12.5 trillion -- with a slightly lower number estimated for Vietjet Air. Their loss is largely attributable to China market.

Tourism revenue loss in the first four months of 2020 is estimated to reach US$7 billion.

A big name in hospitality, Vinpearl, a subsidiary of Vingroup, recently announced the temporary closure of several of its hotels, resorts and golf courses across the country for maintenance because of the impact of COVID-19. A significant drop in the number of tourists, both domestic and international, year-to-date, has been reported.

In its monthly Client Note, Vietnam Asset Management (VAM) says the Government is working on measures to support the economy and impacted enterprises.

At the Government's regular monthly meeting on March 3 in Hanoi, solutions to stimulate the economy and support COVID-19 affected businesses were discussed.

The State Bank of Vietnam (SBV) is to work with commercial banks on a new credit package of VND250 trillion (US$11 billion) that will offer lower interest rates for virus-hit enterprises.

VAM says many commercial banks have already taken action (debt restructuring, waiving and/or lowering lending rate and fees to affected customers).

In addition, the Ministry of Finance plans to propose a supporting package of VND30 trillion (US$1.3 billion), comprising other measures like deferring and/or reducing taxes, social insurance fees, land rent and other fees to affected firms.

The Government has also urged related ministries and Government agencies to speed up disbursements for public investments to support economic growth. (ATI).