Despite the pandemic, Vietnam’s GDP increased in 2020 according to the IMF with a revised forecast from 0.8 percentage to 2.4 percent.
Vietnam’s increased GDP is due to its containment of the COVID-19 pandemic. According to the mission chief of Vietnam and IMF’s division chief in Asia and Pacific department, Era Dabla Norris.
The country had an advantage from its well-planned fiscal policies that were aimed to provide assistance to at-risk households and establishments.
The State Bank of Vietnam strategically lowered the funding cost, lessened liquidity constraints and assisted in the flow of credit, Norris added.
Norris expects an economic recovery next year with an estimated 6.5% GDP increase and inflation rate at 4%. However, these are all projected estimates and will surely vary of different variables such as possible outbreaks, protracted global recovery, trade tensions and corporate distress. All these can result in multiple firm business closures and bankruptcies.
She also said given these uncertainties, being flexible about the size and composition of the policy support will be important. Fiscal policy should play a larger role in the policy mix.
She also stressed to expect a widened fiscal deficit due to decline in revenues and increased cash transfers and capital spending. And with this, the fiscal should prioritize on improving efficiency in the short term.
Norris suggested that long term projects must be aimed towards mobilizing revenues on green infrastructure, boosting the social protection system and safeguarding debt sustainability.
The IMF believed that SBV has up its ante balancing supporting recovery of the economy and baking system resilience amidst the situation.
Along with this is the close monitoring of risks in its banking sector given there are several capital buffers compared to other countries and a series of economic uncertainties.
Vietnam’s GDP growth last year was 7.02% which was considered the second highest growth figure in the last decade.
