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REPORT

PHOTO: VIET TUAN
Into a new era

The Covid-19 crisis has accelerated the digital transformation of Vietnam’s
economy, according to the World Bank, and digitalization will be the future.

ietnam’s economy grew by a robust posted in the first half of 2019. The retail, Bac Giang appears to have been basically
5.6 per cent in the first half of 2021, recreation, and transportation sectors expe- controlled, allowing for production activities
V but faces serious internal and exter- rienced the sharpest fall in activity. The in industrial zones to gradually recover. But
nal risks, including a domestic Covid-19 closing of borders to most foreign visitors, the Purchasing Managers Index (PMI),
outbreak that has spread to most cities which were down 97.6 per cent, also con- which is a leading indicator, fell to its lowest
and provinces since late April, according tributed to a deep recession in the tourism level in June since May 2020.
to the latest Taking Stock report, the World and transport sectors. The pandemic has also deeply affected
Bank’s biannual update on Vietnam’s eco- Since the end of April, both industrial the daily lives of workers, businesses, and
nomic performance and released in August, and services activities have fallen sharply households.
highlighting the economic pains associated due to more stringent social distancing On the external front, the merchandise
with the most recent pandemic outbreak. measures, and mobility restrictions have trade balance has turned to deficit over the
The main driver of economic growth shuttered services. In July 2021, retail sales last few months while foreign investors have
in the first half was the industrial sector, fell 19.8 per cent; the largest drop since demonstrated some caution. It appears that
which contributed about 53.2 per cent, April 2020. Growth in industrial production disruptions in industrial zones and supply
followed by services with 30.7 per cent decelerated, from 4.9 per cent year-on- chains caused by the broad-based Covid-19
and agriculture with 7.6 per cent. Industrial year in June to 2.2 per cent in July. Manu- resurgence have forced exporters to close
growth was back to its pre-pandemic level facturing managed slightly better growth, factories temporarily or delay production.
of about 8 per cent thanks to expanding of 2.9 per cent year-on-year, with apparel According to Mr. Rahul Kitchlu, Acting
manufacturing production. and leather growing 5.8 per cent and 8.9 World Bank Country Director for Vietnam,
Agriculture, which has been relatively per cent, respectively. whether Vietnam’s economy will rebound
isolated from the pandemic, grew by about Resilient manufacturing growth appears in the second half of 2021 will depend on
3.85 per cent, benefiting from favorable to be partly rooted in some industrial parks the control of the current outbreak, the
climate conditions and the end of the in the southern region being allowed to effective vaccine rollout, and the efficiency
African swine fever outbreak. Services still continue production and provide inputs of fiscal measures to support affected busi-
lagged behind, with growth of just 4.0 per into supply chains. In addition, the pandemic ness and households and stimulate recovery.
cent, or about 60 per cent of the rate in the northern provinces of Bac Ninh and The report suggests that authorities

18 | VIETNAM ECONOMIC TIMES | SEPTEMBER 2021