Vietnam is on track to be a big winner from the pandemic disruptions. The Southeast Asian country checked Covid-19 and is set to be one of the fastest growing economies in the world this year. As global trade slumps, Vietnam looks like a hardy destination for companies as they shift global supply chains out of China and seek to avoid the political crossfire between Beijing and Washington.
Hanoi’s aggressive response to the pandemic has paid off. As of June 16, Vietnam, which shares a 1,400-km border with China, recorded just 334 confirmed Covid-19 cases and remarkably, zero deaths, according to the World Health Organization. And the numbers seem credible. Workplace and residential activity have rebounded back to pre-outbreak levels, according to Google mobility data. Manufacturing and industrial activity in the $300 billion trade-dependent economy in May have started to improve from a month earlier.
Prime Minister Nguyen Xuan Phuc is targeting an overly ambitious growth rate of 5% this year, down from 7% in 2019. But tourism contributes to just under a tenth of GDP. With global demand weak and cross-border travel virtually non-existent, second-quarter growth will probably be much worse than the decade-low annual pace of 3.8% in the three months to March.
Even so, Vietnam stands out as one of the few major economies that will expand at all in 2020: the World Bank forecasts growth of 2.8% this year. Big manufacturers like South Korea’s Samsung Electronics have long been present, thanks to a young population and friendly policies. Over the past five years, Vietnam has gained the most market share in global exports in the East Asian region, Natixis economist Trinh Nguyen calculates.
Foreign direct investment inflows, already at record highs, should accelerate: Vietnam’s impressive handling of the coronavirus will give it an edge over others like India which hope to lure manufacturers but are struggling to manage the pandemic. A $650 million KKR-led investment into property group Vinhomes on Tuesday underscores the rising interest in a country that seems like a port in the storm. Vietnam can keep building on its good crisis.