While Covid-19 may have taken a heavy toll on the global economy, it’s fair to say that some nations have been more adversely affected than others.
One country that has showcased robust strength in the wake of the coronavirus pandemic is Vietnam, which has grown at an average rate of between 6% and 7% over the course of the last few years. Although this is projected to fall to 2% or 3% in 2020, this will come at a time when most nations will enter a period of negative growth by the end of the year.
In this post, we’ll explore this further, while asking what are the key drivers for economic growth in the region?
The Key Drivers of Growth in Vietnam
Interestingly, one of Vietnam’s most established economic drivers is trade, with the country known as a prominent exporter of goods to nations across the globe.
While the coronavirus pandemic (and subsequent lockdown earlier in the year) caused global trading volumes to fall overall, Vietnam’s activity and growth within this sector remained in positive territory.
This translated into an impressive growth rate of 10% during the third quarter, making Vietnam the country with the fastest growth rate in terms of export trade anywhere in the world.
During the peak in October, the trade surplus rose to a record high level of $18.72 billion, enabling Vietnam to increase its foreign reserves even while the value of the Vietnemese dong slumped against the greenback.
Another key economic driver in Vietnam is manufacturing, which has also continued to sustain growth while public investment has seen a sustained uptick in disbursement during the third quarter in particular.
This is largely thanks to the Prime Minister’s aggressive instructions and the efforts of ministries and provincial authorities, which created a scenario where the disbursement rate reached 68% of the total target for 2020 by October.
This metric is expected to accelerate in the final two months of the year, with the target likely to be exceeded before 2020 draws to a close.
The Impact of Trade Agreements
If we cast our eyes back to 2019, we see that Vietnam’s import-export turnover breached the $500 billion mark. This betrays the fundamental strength of the country’s economy, and the potential impact of free trade agreements on this metric.
For example, the European Parliament ratified the lucrative EU-Vietnam Free Trade Agreement (EUVFTA) and EU-Vietnam Investor Protection Agreement (EUVIPA) in May of this year, with these entities formalising the burgeoning trade arrangements between these two high-growth regions.
Having now entered into force, the agreement will continue to minimise barriers to international trade and optimise tariff reductions, while simultaneously aiding investor protection and global trade facilitation.
These ongoing benefits will prove to be incredibly advantageous to exporting firms, creating a scenario where one of Vietnam’s most significant growth drivers will continue to be empowered for the foreseeable future.
Given that the UK has also recently ratified a separate trade agreement with Vietnam (now that the former has left the single bloc), there’s no doubt that the future is bright for the Southeast Asian nation regardless of what the coronavirus has in store in the coming weeks and months.