Completion of vaccine coverage by the end of 2021, or at the latest by early 2022, is one of the conditions for economic recovery and development. Photo: VNA

The process of recovering economic activities after prolonged social distancing in Vietnam may face a number of obstacles, such as supply chain disruptions, logistics bottlenecks, or labor shortages.

However, with experience and capacity, the ability to produce a vaccine against Covid-19 will soon ensure the goal of vaccinating the entire population. The country will soon return to normal, and the economy will recover quickly.

Completion of vaccine coverage by the end of 2021, or at the latest by early 2022, is one of the conditions for economic recovery and development.

Economy affected by Covid-19 in 2021

In 2021, Vietnam has faced Covid-19 on a much larger scale and severity than in 2020. The economy was severely affected, and it also revealed many problems both in the short and medium-term.

Since the third quarter of 2021, the economy has been affected, largely due to congestion in the circulation of goods and services in the country. Industrial production was stagnated, domestic supply chains were broken, residential consumption declined, and exports increased slowly (2.51%). Employment rates fell in most export-oriented industries.

Over 90% of businesses reported being affected. The percentage of businesses that closed or temporarily stopped operating increased (14.1%). The percentage of medium and large-sized businesses that had to close also increased, showing that Covid-19 had a great impact on businesses.

Not only short-term effects, Covid-19 in the period 2020-2021 shows the ability to affect some long-term factors of growth. Labor structure changed due to shifting between industries, investment capital decreased because public investment could not be disbursed on schedule. Private investment and FDI both increased slowly.

The economic recovery process in 2022 will face many challenges. Photo: WVR

Risks and challenges in 2022

In the coming time, the economy will face a number of opportunities and challenges, threatening its ability to recover quickly.

The world economy continues to recover quickly due to high vaccination rates in global economic drivers, especially in the EU, US, China, and Japan.

FDI inflows are recovering quite quickly and are expected to return to pre-Covid-19 levels (US$1.4 trillion) by the end of 2022.

FTAs, especially three major agreements including CPTPP, EVFTA and RCEP came into effect in the first years, with a large degree of tariff reduction, helping to restore exports and production.

However, a series of risks are also posing in the short and medium-term, both from outside and inside the economy.

Internal risks include:

Risks from shifting domestic capital flows. Capital flows may leak to risky fields such as real estate and securities, while capital for the production of enterprises is still in short supply.

The risk of bad debt is increasing, affecting the safety of the banking and financial system.

State budget revenues and expenditures faced difficulties due to the decrease in sustainable revenues from taxes while spending demand increased rapidly due to pandemic prevention and support for businesses and people.

Labor recovery may be slow, directly affecting growth in the short and medium-term.

From the outside, risks also threaten the economy's ability to recover in 2022. In which, fluctuations in the prices of raw materials, oil, food have been very large since the beginning of 2020, threatening to increase import prices, affecting production costs, due to the fact that Vietnam depends heavily on external materials.

The process of recovering economic activities after prolonged social distancing in our country may face a number of obstacles, such as supply chain disruptions, logistics bottlenecks, or labor shortages. Photo: WVR

Conditions for economic recovery in 2022

Facing opportunities and risks both inside and outside, the economy in the fourth quarter of 2021 is unlikely to recover quickly. Therefore, Vietnam's growth in 2021 will be at best close to 2%, more likely between 1.5-2%. In 2022, depending on the favorable context, GDP growth is forecast between 5.8% and 6.7%. For the economy to recover and grow, in the coming time, especially the first quarter of 2022, it is necessary to focus on the following solutions:

Pandemic control: This is the premise to recover growth in the fourth quarter of 2021 and 2022. Besides the issuance of the Resolution about safe adaptation to Covid-19, accelerating vaccine coverage is the most effective solution in the current context.

Social security support: The timing of social security support is very important. The 2021 support package has been implemented better than the 2020 package. Current measures are on the right track. The support approach has shifted to broader and more substantive support than in 2020.

Supporting production and business of enterprises and households: In the short term, reducing costs for businesses is very necessary. The fourth quarter of 2021, the first and second quarters of 2022 should be considered as the time for recovery, not only in the short term but also in the medium term.

Investment: Promote disbursement of public investment. In 2022, this is still an effective tool to stimulate growth.

The immediate task in the first quarters of 2022 is to focus on removing obstacles to public investment, construction, compensation and site clearance institutions. It is necessary to soon promulgate a law amending the laws related to investment, bidding and construction, especially ODA capital.

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