Recent days witnessed a dramatic increase in many economic issues of various countries in the world due to the outbreak of Covid-19, the disease caused by a kind of coronavirus which first originated in Wuhan, China in late 2019. To be specific, the disease now affects more than 150 countries, areas and territories in total. Over 209,000 confirmed cases and 8,700 deaths have been recorded, according to the World Health Organization (WHO). This disease is rapidly widespread and has enormous influences on the global economy in general. Vietnam is also one of them who is suffered from it in a vast array of aspects of the Vietnamese economy, including positive and negative ones. It can be seen that it is not a fair fight, but it is one that most countries and areas around the world would cope with all the same.
In general, it is predicted that the economic growth of Vietnam in 2020 would reach 6.8% and also take risk of decreasing by 0.84% for the year due to the effects of coronavirus outbreak on Vietnamese economy, according to former Vietnamese government adviser Le Dang Doanh told Business Insider. Moreover, Vietnam is currently suffered heavily from such unpredictable influences of the Chinese economy, whose country was found the first confirmed cases infected towards Covid-19. This might change the situations that in the past, Vietnam was one of the primary beneficiaries of the US-China trade war, which can be seen through various firms moving into Vietnam for manufacturing goods. That’s why we can claim that Covid-19 has multiple influences on the Vietnamese economy, including aviation services, tourism, export-import and manufacturing industry.
In terms of aviation services, the Civil Aviation Authority of Vietnam (CAAV) has halted most flights from the Southeast Asian countries to Wuhan City in order to prevent the spread of the new coronavirus disease. For example, Vietnam Airlines has already suspended flights between Vietnam and mainland China, Hong Kong, Macau, South Korea, France, Russia, Malaysia, and Taiwan until the end of April. The CAAV also claimed that Vietnam airports served nearly 8.1 million passengers in February in total, which illustrated the reduction of 11.6% compared to the same period in previous year.
To be more specific, this figure included 2.4 million foreign visitors and 5.7 million domestic passengers, down 29.8 % and 0.7 %, respectively. Those fact indicated that Vietnamese aviation market is heavily undergone the double-digit fall after many years of steady and extremely stable growth owing to the direct impact of the COVID-19 outbreak. For instance, the national flag carrier, Vietnam Airlines claimed to lose nearly VND 200 – 250 billion in revenue coming from both passenger and cargo transportation, which showed a rapid drop by 20 to 25 % only in the first half of February.
Furthermore, CAAV also reported the loss of Vietnam aviation market in revenue due to the direct impact of China, which has recorded the biggest number of infected coronavirus epidemic cases when it accounts for 26.1 percent of the passenger and cargo volume that domestic carriers transport to and from international destinations and contains 14 airlines with total 72 routes operating between Vietnam and China.
Consequently, it leads the reduction of more than 400,000 passengers per month owing to the postponement of most flights to China. They have also had to pay more for ticket exchanges, cancellations, and sterilization, the authority said. In a report assessing the outbreak’s impact on the economy, analysts from the BIDV Training and Research Institute said air transport would be hit the most since foreign passengers using Vietnam’s air transport services account for more than 79 percent of total international arrivals in the country.
In particular, Chinese visitors arriving by air make up 70 percent of all Chinese visitors to Vietnam. It also rated the aviation sector’s short-term outlook as negative, noting that all airlines could be influenced by the epidemic due to lower travel demand, especially from China. As such, the coronavirus outbreak’s impact could be the hard challenge to the Vietnamese aviation industry in the next few months and definitely require the Vietnam government to implement such appropriate solutions to prevent its decline.
In general, it is said that there currently has been a dramatic drop in tourism in most places in Vietnam. To be specific, a survey conducted by the Vietnam Tourism Advisory Council (VTAC) shows that the hotel bookings rates in Vietnam were decreasing by between 20 and 50 percent compared to the same period last year. In lasted news, Sun Group corporation representative indicated that entertainment services accounted for 70% of the revenue, but there had been a decrease by 2 million visitors in the past two months, leading to the decline by more than 2,000 billion VND as a result.
Besides, Joint Stock Company (JSC) Vinpearl has announced the temporary closure of two big hotels located in Nha Trang, which are Vinpearl Discovery 1 and Vinpearl Condotel Empire until March 31st, 2020 due to the revenue loss in recent periods. Besides, the number of international visitors coming in March 2020 is expected to be reduced by over 60 percent, and domestic tourists may be decreased by 80 percent due to fears of this deadly virus. In particular, Chinese visitors, who typically make up about a third of tourists coming to Vietnam, are extremely scarce.
Recently, that figure has dropped to almost nothing due to China’s policies banning travel to other countries and Vietnam barring the entry of travelers from areas affected by the outbreak of Covid-19, especially Wuhan, where the first infected cases are confirmed. According to the head of the department of tourism, potential visitors from other countries are also avoiding traveling to Vietnam owing to the serious concerns about its serious epidemic in Asia during the outbreak.
Moreover, it is estimated that Vietnam’s tourism would face a significant loss of between $5.9 and $7 billion of dollars in revenue in the next three months since people are likely to avoid traveling and cancel any plans. Those declining figures clearly indicate the pressure on the issue of unemployment currently in Vietnam because more and more tourism places like hotels, restaurants, resorts, etc. asked their workforce to take unpaid jobs or even temporality leaves until the outbreak is prevented at a controllable level.
In the time that the outbreak situation of the coronavirus is complex and gradually increasing, it makes imports and exports have a significant decline, especially the agriculture and fishing industry, with enormous damage. Recently, Vietnam announced it had eased its restrictions on trade with China, attempting to assist businesses impacted by the coronavirus. For example, the volume of imported goods to Ho Chi Minh City, such as machinery, equipment, iron, steel, and petroleum, have all decreased significantly relative to the previous year according to the statistics from Ho Chi Minh City Customs.
It also states that the import turnover of Ho Chi Minh City dramatically decline in the previous month, then leading to decreasing revenue at 1600 billion VND compared to last year. Various importing items have suffered a significant decline, for instance, importing petroleum item dropped by 14.1% in volume and 27.2% in value, which is equivalent to a loss of 345 million USD at that time. Moreover, in 2019, China ranked the second-largest foreign market in Vietnam, just behind the United States. Since trade was restricted owing to the outbreak of the Covid-19 epidemic, raw materials imports shrank, significantly affecting production in most industries and forcing many businesses to let workers go.
As a large portion of raw materials imported is used to produce export items, the fluctuations in imports will affect production and exports as well. Among the three main groups of exporting items, agriculture-forestry-fisheries contributed the most, with $8.2 billion. Furthermore, the blow of the novel coronavirus strain immediately triggered export turnover to China sharply drop.
With the onset of COVID-19, Vietnamese businesses, especially those in the manufacturing sector, are experiencing a slowdown or cease in production, due to the lack of raw materials from foreign markets, especially China. China is a significant supplier of steel and components for electronics, automobiles, and phone manufacturers in Vietnam. It is estimated that 17 percent of Vietnam’s economy is exposed to trade with China, making it the highest in the region. 30 percent of the components used for manufacturers in Vietnam, comes from China.
For example, many factories, such as Tan Hoang Gia Trading Co., which typically imports plywood from China, have been unable to get materials from the country. With borders partially closed, companies that export to China have struggled to sell their goods. Another case is the garment manufacturing industry, which is regarded as the sector having direct damage from Covid-19 due to the lack of manufacturing materials and the deadlock of exporting situation. It would deal with an estimated loss between 1.5 and 2 billion USD.
Let’s take May 10th, one of the famous garment manufacturing company in Vietnam, for example. It is dealing with the considerable shortage of raw materials, mainly importing from China. Besides, it hired about 12,000 workers working in a vast array of factories in many provinces like Thai Binh, Ha Noi, Ha Nam, etc. and this figure is gradually dropped, causing a considerable loss in revenue of the company, whose main profits is from manufacturing and selling goods.
Relative to other Asian countries, Vietnam has significant achievements in terms of how the country dealt with the coronavirus outbreak. It is evident that the number of cases confirmed now is just 91 and no death recorded until now, which shows a lower figure compared to other countries like China, Korea, Italy, France, America, etc. Nonetheless, COVID-19, the disease caused by the new coronavirus strain, has posed a significant challenge for the country’s economic growth, and is likely to continue to unless it is adequately dealt with.
In front of the uncontrollable impacts of Covid-19, many businesses requested government soon have long-term solutions to prevent and contain this situation from long-lasting in order to help domestic ones overcome the current difficult time. It is evident that the aviation and tourism industry got affected badly; however, it is not the permanent end of the tourism industry in current situations. From now on, there must have such appropriate solutions to reduce the pressure of Covid-19 on tourism.
Such positive ones are like tourist destinations continue to plan a new marketing campaign to gain a competitive advantage in comparison to other neighboring countries. What is more, international airports throughout Vietnam were asked to work closely with healthcare and quarantine agencies to monitor the body temperature of arriving passengers. Those who show signs of being infected with the new coronavirus will be properly quarantined and treated. As can be seen that so as to reduce the detrimental drawbacks of this coronavirus outbreak, Vietnamese government could approve a proposal on solutions to help production businesses overcome difficulties well; to be more specific, the government should extend the tax, reduce land fees in order to cover firm’s pressure on the operating cost.
In short, the outbreak of the coronavirus epidemic name COVID-19 is increasingly becoming more and more complex and challenging to control on a large scale. In the worst situation, a vast array of hard currency like US dollars, Yen or Euro turn to fall sharply, and China’s economy is at risk of having the lowest GDP on record ever. Additionally, the Vietnam economy suffers heavily from its domino effects as well. As such,
The progress of the COVID-19 epidemic is increasingly complicated and unpredictable in the world and Vietnam in particular. The worst scenario is that an economic crisis will occur when the USD, Yen and Euro fall dramatically, and China’s GDP is at a record low. Of course, Vietnam’s economy would also then be heavily affected by the domino effect. Despite the drawbacks, it is also believed that coronavirus outbreak has the potential to create some economic opportunities in Vietnam to accelerate and promote the economic progress by implementing more and more effective and long-term sustainable strategies to reduce partly the dependence on China from input materials imported and investing projects to output markets.
Supply-chain issues in China might help manufacturers decide to move more production into Vietnam, continuing a trend sparked in part by Vietnam’s cheaper labor market and the US-China trade war. It means that the continued movement of businesses wanting to relocate out of China, which leads to reducing dependence onto China in more economic aspects, especially goods imported and exported.