Vietnam economy is Asia's shining star during Covid
- Published
Vietnamese factory
Vietnam has minimised the economic damage from Covid-19 and is the only country in South East Asia on track for growth this year.
Its economy is expected to grow 2.4% this year, according to latest figures from the International Monetary Fund.
The IMF credited “decisive steps to contain the health and economic fallout from COVID-19” for the country’s success.
Vietnam has had only 1,288 Covid-19 cases and 35 deaths.
The IMF is predicting a strong economic recovery in 2021, with growth projected to strengthen to 6.5% “as normalisation of domestic and foreign economic activity continues.”
Although Vietnam lacks the health infrastructure of many wealthier countries, it has been widely praised for its public health measures, which quickly brought numbers under control.
It was quick to develop testing kits, and used a combination of strategic testing, aggressive contact tracing to help control numbers.
The country has seen slower growth this year and its once-thriving tourism sector has taken a particularly bad hit, but it has avoided the worst economic effects of the pandemic.
Work from home windfall
A number of factors have cushioned the blow, according to Michael Kokalari, chief economist for Vinacapital, a Vietnam-focused investment company.
Perhaps the most unexpected windfall has come from the huge increase in the number of people working from home globally.
“People have bought a new laptop computer or they’ve bought new office furniture, for both working and spending more time at home. Well, a lot of those products are made in Vietnam,” he told the BBC.
Vietnam’s exports to the US have increased by 23% in the first three quarters compared to the same period in 2019, with electronics exports up 26%.
Tariffs woes
Vietnam’s manufacturing sector has grown enormously over the past decade because businesses have started to look elsewhere as labour costs in China increased.
The ongoing US-China trade war has also made China a less attractive place to manufacture, with a number of tariffs in place on exports.
Many multinationals have started operating in Vietnam, including global technology leaders like Apple and Samsung.
Apple now has plans to manufacture its high-end Airpods studio earphone in Vietnam.
The pandemic has also prompted more companies to consider manufacturing there, because of the need to diversify their supply chains, said Mr Kokalari.
“When Covid comes, you thought you had a global supply chain, and you find out that you only have a China supply chain and you can’t produce.
Well that’s a much more urgent, emotionally catalysing problem,” he added.