Huge challenges ahead for economic growth amid COVID-19 outbreak
The COVID-19 outbreaks in Ho Chi Minh City and many southern provinces are destroying the "health" of local businesses and hindering economic recovery,
According to Assoc. Dr. To Trung Thanh from National Economics University, the nation’s GDP during the first six months of the year recovered to a certain extent with an increase of 5.64%, far higher than the 1.82% level recorded during the same period from last year.
Despite this, the recurrence of the COVID-19 pandemic in a number of key localities involved in the global production chain, including Bac Giang, Bac Ninh, Hai Duong, Hanoi, along with the economic hub of Ho Chi Minh City and some southern provinces, poses a great challenges to the national economy. Indeed, this is set to be a major issue moving forward into the second half of the year.
"It is almost certain that the Government's 6.5% economic growth target set forth at the beginning of the year is unachievable," Assoc. Dr. To Trung Thanh commented.
Dr. Thanh said that the ongoing COVID-19 pandemic, notable for the spread of the new Delta variant, coupled with a high infection rate, could threaten the recovery of the United States, along with that of EU nations and China, thereby adversely impacting trade and investment in the Vietnamese market.
Furthermore, the uptrend in the price of basic commodities and gasoline remains ongoing as the Organization of the Petroleum Exporting Countries (OPEC) and its allies maintain oil production levels lower than the global average, a factor which will greatly impact the cost of domestic production.
In relation to the demand, the outbreak of the pandemic and the implementation of mass social distancing measures in many localities nationwide has caused income, as well as consumption demand, to plummet.
With regard to supply and the production of important industries such as transportation, warehousing, tourism, education, training, manufacturing, and processing, all continued to be strongly affected due to a sharp drop in demand and increased production costs, along with supply chain disruptions and pauses.
Most notably, the Purchasing Managers' Index (PMI)'s sharp drop from 53.1 points in May to 44.1 points in June indicates the impending difficulties faced by the manufacturing sector.
“The ability of businesses to respond to the pandemic is also decreasing when the pandemic lasts too long, eroding their endurance. Not only small and medium-sized businesses, but also large-scale businesses have also begun to face difficulties when the pandemic is long and unpredictable. Accordingly, businesses not only face great difficulties from the decline in aggregate demand, but also from increased disadvantages from the input side such as rapidly increasing energy prices, land rents, and production prices," Dr. Thanh pointed out.
Moreover, Dr. Thanh stated that extreme and inconsistent anti-pandemic measures among localities is having a negative impact on transportation and logistics costs, as well as potentially disrupting the supply chain for customers and businesses.
Appropriate and flexible response solutions needed
According to economist Dr. Can Van Luc, economic growth during the remaining months of the year will be negatively affected by the complicated developments regarding the pandemic. This comes amid the country's pandemic containment strategy proving ineffective and the ongoing vaccination campaign being slow paced compared to many other countries.
As a means of achieving the highest level of economic growth, Dr. Luc stressed the necessity of being consistent with the dual goal and devising solutions to promote production and business, along with policy solutions being carried out both appropriately and flexibly.
"It is necessary to find additional and alternative growth drivers, take advantage of boosting exports to recovered markets, accelerate disbursement of public investment, develop the digital economy, further promote the improvement of the business investment environment towards creating a favorable foundation for businesses to recover soon when the pandemic is brought under control," Dr. Luc added.
The Covid-19 outbreak in HCM City and neighboring provinces is threatening the livelihoods of people and disrupting production and business chains.