WB warns of shrinking production amid COVID-19 outbreak

The bank said in a recent report that the fourth outbreak of COVID-19 has led to the sharpest rise in the number of COVID-19 infections since the pandemic broke out in Vietnam early last year, forcing the government to implement tougher travel restriction measures, especially in main urban centres and several industrial parks.

According to the report, industrial production in May exhibited high resilience by expanding by 1.6% month-on-month, but retail sales dropped by 3.1% as they were affected by social distancing and closure of shops.

Vietnam’s external economic position slightly eroded in May due to respective declines of 6.7% and 20% in merchandise exports and foreign direct investment (FDI) commitments from the previous month.

Domestic prices increased by 0.3% against April, driven by higher global commodity prices while credit expanded at a slower pace due to weakening economic activities and slightly higher interbank interest rates.

The State budget registered a surplus of VND86 trillion (US$3.7 billion) in the last five months, equivalent to 49.7% of the target set for the year, pushing the State revenue to rise by 15.2% year-on-year.

Total budget expenditure decreased by 3.7% year-on-year to VND581.6 trillion, mainly due to the decrease of public investment disbursement (down 16.5% year-on-year).

The lack of materials for production causing high prices is one of the reasons behind the delay of public investment projects, WB experts said.

Exports may also be affected by production contraction in some industrial zones, they added.

The Vietnamese Government needs to consider adopting a more appropriate fiscal policy to support individuals and businesses affected by the COVID-19 crisis as well as to stimulate domestic demand if the ongoing outbreak is not contained quickly.