COVID-19 Impact Assessment: Analyzing the Potential Impacts of COVID-19 on Vietnam's Economy
The COVID-19 outbreak has brought unprecedented challenges, which are expected to have a significant impact on Vietnam's economic development this year. Based on the current situation, we explore the potential impacts of the COVID-19 outbreak on Vietnam's economy. This research is accompanied by a significant degree of uncertainty. Specifically, during the COVID-19 pandemic, the forecasts have been re-examined and revised every week since the outbreak began.
Furthermore, the Vietnamese economy is highly dependent on other economies. Therefore, the scenarios and predictions regarding the impacts on the Vietnamese economy are also correlated with the impacts on the economies of other countries after the COVID-19 pandemic outbreak.
We hope this publication can help businesses prepare for, respond to and navigate this uncertain and volatile environment.
Vietnam's Current Economic Outlook
Based on revised forecasts in April 2020, the short-term outlook for Vietnam's economy remains positive.
Vietnam is expected to be one of the few countries to continue to grow in 2020, even as the rest of the world is forecast to fall into recession. However, there are significant fluctuations in current forecasts, highlighting the significant uncertainties that remain in place in May 2020. 
Following its accession to the WTO in January 2007, a notable feature of the Vietnamese economy over the past decade has been its strong and growing links with other economies, through trade and investment. Two of the key drivers of this economic growth and development have been: (1) the level of foreign direct investment and (2) the country’s export capacity. More than 50% of Vietnam’s exports are destined for the following markets: the United States, China, the European Union and the United Kingdom.
Q1 results so far have been mixed. Vietnam appears to have been able to maintain its overall export levels to key export markets. However, we can expect to see a stronger impact in Q2 and Q3, as these Q1 figures do not reflect any slowdown in the overall economy or consumption in the US and Europe.
Slow economic recovery outlook to emerge from Vietnam's key export markets
In the coming period, a key factor affecting Vietnam's economy will be the impact of the COVID-19 outbreak on consumption indicators of major export markets - namely the United States and Europe.
The most recent forecasts from the WTO, dated April 2020, predict an unprecedented decline in global trade, with US and European import values expected to be significantly affected.
Recent industry reports forecast an unprecedented decline in consumption of: (1) footwear and apparel; and (2) phones/other related consumer electronics in 2020. Most scenarios for these two sectors now project further declines in Q2 and Q3 of 2020, with a gradual recovery to pre-COVID-19 crisis demand levels by the end of 2020 and into Q1 of 2021.
While Q1 2020 has only shown a small and limited impact on the Vietnamese economy, the worst may lie ahead in Q2 and Q3, as: (1) consumer demand in key export markets is expected to face an unprecedented decline; and (2) there will be increased competition from China, with China gradually returning to normal business in Q2. Both of these factors pose significant threats to Vietnam’s trade balance and surplus for 2020, and on the path to gradually returning to the situation before the COVID-19 outbreak.
Reference source:
Pwc Vietnam. “THE IMPACT OF THE COVID-19 PANDEMIC ON VIETNAM'S ECONOMY”. Pwc Vietnam, May 2020. https://www.pwc.com/vn/vn/publications/vietnam-publications/economy-covid19.html.