A health worker holds a blood sample taken to test for the Covid-19 coronavirus at a testing center in Hanoi on July 30, 2020. Photo: AFP / Nhac Nguyen

Like its neighboring countries, Vietnam’s economy has been struggling after months of fighting against the pandemic. It is nonetheless still an outlier given its effective response to the Covid-19 outbreak, with impressive growth. Therefore, its economy is expected to witness positive signals soon after the pandemic is brought under control, which is highly unlikely for those countries that are seriously plagued by Covid-19.

The data speak for everything. Vietnam’s GDP growth in the second quarter of 2020 was about 0.4% year on year. Although this was the economy’s worst performance in 35 years, it was exceptional compared with its neighbors, some suffering from negative growth. 

The World Bank forecasts that Vietnam’s GDP growth could reach 2.8% in 2020 and will recover to 6.7% in the next year, and S&P Global Ratings expects that Vietnam will be the second-best performer among Asian economies this year.

All this indicates that the country is well able to bounce back soon from the crisis. Thus Vietnam should re-emerge quickly in the post-pandemic period, making it one of the best performers in the global economy, as it has been over the past decade.

Thanks to its stringent lockdown measures to contain Covid-19’s spread months, Vietnam is now gradually becoming one of the most attractive destinations for foreign investment.

As noted previously, its efficiency in getting the pandemic under control has turned it into a safe place for international firms to do business during and after the Covid-19 crisis. According to a study released by Hong Kong’s Deep Knowledge Group, Vietnam is the ninth-safest place in the Asia-Pacific region amid the pandemic.

Recently, Vietnam began gradually reopening its international flights and lifting the lockdowns in pandemic hotspots, which raises a concern over its vulnerability to the next Covid-19 wave. However, the government is cognizant of this risk as well, as evidenced by its close eye on the situation. 

Moreover, with its previous experience in fighting against the pandemic and its superior preparedness, Vietnam could strike the right balance between public health and economic growth. If so, it will be among the few bright spots in a gloomy picture of the global economy.

Additionally, Vietnam turns out to be a big winner in the current regional landscape, analysts say. China’s economy, despite having gradually recovered, has been hugely damaged by the Covid-19 pandemic, and its souring relationship with the US has led to a decoupling between the two largest economies in the world.

Against this backdrop, Vietnam, with its favorable conditions, is a good choice for those economies seeking alternative destinations in order to reduce their reliance on China’s manufacturing.

For example, the Japanese government has subsidized 15 companies to move their factories to Vietnam, paving the way for a wave of Japanese foreign direct investment. Also noteworthy, according to a report by Goldman Sachs, for many US firms “when asked about top locations for moving out of mainland China, Vietnam and India are the most mentioned destinations.”

Although Vietnam is far from being able to replace China as a global workshop, it has an unprecedented chance to become a manufacturing hub, provided that it can utilize the upcoming waves of investment well.

During the Covid-19 crisis, while many countries have been suffering from economic sclerosis, Vietnam’s economy has continued to take firm steps toward international economic integration.

Notably, on June 8, Vietnam ratified a free-trade agreement with the European Union (EVFTA), which took effect from August 1. As well, it has been working closely with other members of the Regional Comprehensive Economic Partnership (RCEP) with the hope of signing this FTA before 2021.

All of these achievements could be considered exceptional under the current situation, which is inimical to global economic activities, and Vietnam is expected to gain enormously from these FTAs.

For instance, the EVFTA decreases tariffs for Vietnamese exports of seafood, textiles, and wood products to the EU, which are ones in which Vietnam has a significant competitive advantage. This would catalyze Vietnam’s economic modernization, transforming it into a more competitive economy in the global value chain.

Despite suffering tremendously from the Covid-19 pandemic like many other economies in the region, Vietnam is praiseworthy for what it has done so far. The country is undoubtedly among the few that will gain more than lose from the global health crisis.

As long as it can maintain the current momentum, Vietnam will be a rising star in the global and regional economy, paving the way to becoming a high-income country in 2045 as it is aiming to do.

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Phuong Pham

Phuong Pham is a graduate student at the School of Politics and International Relations, Queen Mary University of London. His articles have appeared in The Diplomat, East Asia Forum, Policy Forum, Global-is-Asian, Geopolitical Monitor and The Geopolitics.