Businesses must seek opportunities in adversity

SGI

The Covid-19 pandemic is causing havoc and a lot of panic in Italy, the United Kingdom, Spain, South Korea and Iran. Even in the US, the government has now declared it a national emergency.

Businesses must seek opportunities in adversity

In this bleak scenario, the effect on Vietnam's economy will prove to be catastrophic,as more infected cases have now appeared after the country declared that its 16th Covid-19 patient was its last and fully cured. In a worst case scenario, we can now expect this deadly virus to be contained or controlled only by the end of the second quarter of 2020.

Some economic forecasts and an outlook of the economy by international organizations such as the IMF, the World Bank and the General Statistics Office show that Vietnam's economy in the first quarter has been seriously affected. GDP growth in the first quarter is only around 5.8% to 6%, while the average inflation in 2020 could increase by 4.8% to 4.9%.

Exports in the first and second quarters could go from USD 46.5 to 50 bn, only 20-21% compared to the same period in 2018. Imports in the first and second quarters will decrease by 13% to 16% compared to 2018, reaching only around USD 50 to 54 bn. Revenue from international tourists has decreased by USD 5 to 7 bn. Although industrial production has increased by 6.99% to 7%, it is lower than the annual plan by about 11.21%, due to the adverse effects of Covid-19.

The travel industry as well as the hotel industry have been the most affected after huge numbers of Chinese travelers have grounded all their travel plans. The number of Chinese travelers account for 30-40% of all international visitors to Vietnam, and hence the impact to tourism is unsustainable. International travelers from other countries and also domestic travelers have restricted their movements as they are afraid of getting stuck or caught in unfamiliar places such as Hanoi, Da Nang, Ho Chi Minh City, or Binh Thuan, not knowing of facilities available in these locations.

Besides, the aviation industry and related services are also greatly disrupted with flights either being delayed or totally suspended to China and several other countries where the virus is spreading as fast as it is in the United Kingdom, France, Italy and the United States.

Some key import and export industries are having to tackle their own problems and difficulties due to irregularities in the supply chain, especially if their business depends on imports and exports with China, the United States, the United Kingdom and France. China is Vietnam’s most important economic partner, accounting for a large portion of Vietnam's imports and exports. While agricultural exports to China in 2019 reached USD 5.92 bn, accounting for 35% of the total turnover within the country, estimated exports of processed agricultural and forestry products fell by more than 29% in the first quarter of 2020.

Many major export industries depend on imported raw materials from China. Estimated first quarter exports of computers and electronic components fell by 8%; phones and related  components went down 27%; textiles were down by 22%; footwear was down 17% and seafood came down to 38%.

A number of industries providing medical examination and treatment services, as well as medical supplies and pharmaceuticals, saw an increased demand for medical products and disease prevention drugs. Businesses operating in the field of trade and e-commerce also benefited greatly as consumers shifted from traditional trading to e-commerce trading to minimize the risk of disease transmission. In addition, the delivery of goods has also increased sharply in freight forwarding services and shipping and delivery activities due to an increased demand for e-commerce.

The pandemic situation will be the driving force for the Government to promote public investment in 2020 to support economic growth, accelerate the implementation and disbursement of public investment, especially large projects, important projects and national target programs. The activities of constructing underground infrastructure and large civil constructions will also be promoted after the pandemic ends. This is an opportunity waiting for large and reputable construction companies.

In the context of such widespread and an increasingly complex pandemic situation, Vietnam is showing a strong resilience and ability to effectively control and contain the level of infection as well as effectively manage all its epidemiological sanitation systems. Therefore, the real estate industry may attract the attention of multinational corporations and companies in the world due to the need to relocate factories and production facilities to Vietnam. Industrial zones in Binh Duong, Ho Chi Minh City, Dong Nai have already attracted attention from large corporations like Foxconn from Taiwan and Apple from USA.

Under the current unpredictable circumstances, basic utilities and necessities have been assessed as being quite stable. Suppliers of clean drinking water and electricity providers will be able to benefit from a rise in cost of electricity, and an increase in living costs shows Vietnam's average CPI forecast at 4.5% to 4.8% in 2020. Even as no one expects this pandemic to last for long, this is a time for all companies to rethink and make the best of a bad situation, seeking opportunities in adversity.

Translated by Kristine

Le Duc Khanh

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