HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

Macroeconomics assignment
Vietnam GDP growth to be among world’s highest in 2020

Tutor: Mr. Vu Viet Dung

Tutorial: Tut 12
Group’s members:
Bui Thi Thu Huyen ID: 1904000052
Mac Thi Kim Oanh ID: 1904010083
Phan Thi Hoai ID: 1906090041
Pham Phuong Thao ID: 1904000104
Date: 10 May, 2021

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Table of Contents
I. Introduction 3

II. Situation of Vietnam's GDP growth rate in 2020 3

III. Reasons for GDP growth rate in 2020 4

IV. Current problems and solutions for Vietnam's GDP growth in 2021 6

V. Conclusion 6

REFERENCES 7

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 I. Introduction
Late 2019, a new virus was found in Wuhan, China and after a few months, it became an
extremely dangerous pandemic. Since then, it has unstoppably expanded from cities to
cities, countries to countries. COVID19 pandemic has been causing a lot of loss to the
human, especially world economics. The factories, companies and enterprises declare
bankruptcy. Unemployment and lack of living standard are troublesome and problematic
with the government in all of the countries. In spite of the difficulties, Vietnam shows the
strong defense in maintaining economic growth as well as enormous economic potential.

II. Situation of Vietnam's GDP growth rate in 2020

Before the Covid epidemic (2019), Vietnam's economy is growing fast with a GDP growth
rate of 6% to 7% in the period 2016-2019. The Gross Domestic Product (GDP) in 2019
achieved impressive results with the growth rate of 7.02%, exceeding the target set by the
National Assembly from 6.6% to 6.8% (the first quarter increased by 6.82%, it increased by
6.73% in the second quarter, 7.48% in the third quarter, and by 6.97% in the fourth quarter).

However, in early 2020, the emergence of pandemic Covid caused the world economy to
experience its worst recession since the Great Depression and far worse than the Global
Financial Crisis (2008), gross domestic product growth has fallen to a record low.

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2020 is supposed to be a difficult and challenging year for the global economy, including
Vietnam. Despite a decrease in GDP growth, contrary to the gloom of the world economy,
Vietnam's economy continued to expand, with an annual GDP growth rate of 2.91% (it will
increase by 3.68% in the first quarter; 0.39% in the second quarter; 2.69% in the third
quarter; and 4.48% in the fourth quarter). Nominal GDP reached $271.2 billion and GDP
per capita reached $2,777 in Dec 2020.

Regarding the use of GDP, final consumption will increase by 1.06% compared to 2019;
realized social investment capital increased by 5.7%; asset accumulation increased by
4.12%; exports of goods and services rose 4.97%; imports of goods and services rose
3.33%. As one of the main drivers of Vietnam's 2.91% growth by 2020, public investment,
with a host of public-financed infrastructure projects playing a key role in driving needs,
supporting business development and job creation.

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Despite the fact that GDP growth in 2020 was at its lowest level since the 2011-2020 period,
our nation had achieved great success, with the highest growth rate among the world's
nations.

Along with China and Myanmar, Vietnam is one of three countries in Asia with positive
growth this year; at the same time, the scale of our country's economy reached more than
343 billion USD, exceeding Singapore (337.5 billion USD) and Malaysia (336.3 billion
USD), making Vietnam the 4th largest economy in Southeast Asia (after Indonesia with
1,088.8 billion USD; Thailand with 509.2 billion USD and Philippines with 367.4 billion
USD).

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Although Vietnam's real GDP growth has been volatile in recent years, it has tended to
decline steadily from 2001 to 2020, ending at 1.6 percent in 2020, down 77.2 percent from
2019. GDP deflator in Dec 2020 decreased 0.15% over the same period last year, but up
0.19% from the previous quarter, reaching 0.98%. According to Minister Nguyen Chi Dung
at the 75th anniversary of the establishment of the Ministry of Planning and Investment on
December 31, 2020, in 2020, the scale of Vietnam's economy will reach about 343 billion
USD, standing in the top 40 largest economies in the world and ranked fourth in ASEAN;
GDP per capita reached 3,521 USD, ranking 6th in ASEAN.

Besides the growth results achieved in 2020, the Vietnamese economy still has many
problems that need to be resolved.

III. Reasons for GDP growth rate in 2020

● According to Fitch Solutions, consumption growth will continue to remain high in
the period 2020-2024 with growth in the food segment at 13.7%, health spending at
14%, personal health care at 15.1%, and personal items at 15.3%.

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 ✔ Due to the impact of the epidemic, products that used to be a basic need have
now become a priority for consumers. People gradually change their
consumption and shopping behaviors, tend to form new consumer habits of
storing goods. Vietnamese consumers in urban areas tend to buy and store
three groups of goods: personal hygiene and household products to keep
them hygienic and disinfect; frozen food, canned food, instant noodles and
cooking oil; products that supplement nutrients and help boost the immune
system, especially for the elderly and children with a higher risk rate.
✔ Another reason for the slight increase in consumption is that Vietnamese
consumers continue to spend a portion of their spending on premium health
insurance. With the current situation of serious environmental pollution and
epidemics and increasing consumer awareness, health will continue to be the
top concern of Vietnamese consumers in the coming years.
● Realized social investment capital in 2020 will increase by 5.7% compared to 2019,
the lowest level in the period 2011-2020 due to the influence of the Covid-19
epidemic on all business activities. However, the highest growth rate of realized
capital from the Government budget to 2020 in the 2011-2020 period is due to
accelerating the implementation progress and disbursement of public investment
capital to maintain economic growth in the context of the disease is well controlled.
● Total state budget expenditure increased due to timely and sufficient response to
socio-economic development, national defense, security and government
administration tasks, payment of due debts. In particular, the state budget has spent
about 17.9 trillion VND on epidemic control and supported people or company in
difficulty caused by the COVID-19 epidemic through social security support
packages 62,000 billion VND.
● From 2016 up to now, the trade balance has been continuously in surplus with the
next year's trade surplus is higher than that of the previous year. Although the export
surplus in 2020 is significantly affected by the decrease in imports, in the context of
complicated epidemics, exports are still a positive signal and an important premise
for the economy to steadily move to 2021. According to Mr. Nguyen Trung
Tien-Deputy Director of General Statistics Office, there are three factors for us to
have a surplus

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 ✔ Strong export growth of domestic enterprises, increase 20.2%
✔ Although the number of items that account for a large proportion and
traditional of Vietnam has been reduced due to the outbreak of
COVID-19 (textile exports), Vietnam has remarkable growth in new
items with high added value such as computer electronics and
components by 25.9%; machinery and equipment increased 39.8%;
interior products rose 57.4%; toys and sports equipment up 59.5%.
✔ In the agricultural sector, all export items decreased, but in the first 9
months of 2020, Vietnam's rice export reached 2.5 billion USD.
Although the amount decreased by 0.6%, the value increased by 12%.
✔ Vietnam's participation in the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), the Free Trade
Agreement with the EU (EVFTA) has opened up great opportunities and
prospects for import and export of goods.
To sum up, Vietnam has taken drastic measures, acting uniformly from the central to local
levels in dealing with the Covid19 epidemic. Second, before the epidemic, we had the
foundations prepared for growth quite well. In the 2016-2019 period, Vietnam has kept
growth steady, creating confidence with businesses. In addition to public investment,
Vietnam has focused on developing the business sector, creating a fairly sustainable
foundation, and helping to keep the economy stable. As a result, the Vietnamese economy
maintains its growth rate with estimated GDP growth of 2.91%.

IV. Current problems and solutions for Vietnam's GDP growth in 2021
Although in the epidemic situation of 2020, Vietnam still can grow GDP, but with the
epidemic situation extending to 2021 and even more, a few years, even a decade or more,
we also need there are a number of long-term solutions to both maintain growth and
overcome the difficulties that Vietnam is facing in 2020.

With forecasts of economic experts on the world economy in general as well as the
economic situation of Vietnam in particular, with complicated and unpredictable epidemic
developments with new strains increasingly difficult to cure and spread. strongly caused the
trade conflict to increase due to the prolonged negative effects of the Covid-19 pandemic,

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potentially many risks of global financial, monetary, public debt crisis and major challenges.
to trade, investment, growth, inequality, poverty and social problems.

To solve all these problems, the following solutions are needed:

● Firstly, there should be preferential financial mechanisms and policies suitable to the
actual situation to create a resilience for the whole economy, stimulating all three
main growth drivers (investment, export and consumption. ) to strive to achieve the
highest level of socio-economic development indicators ... The State needs to
implement appropriate expansionary fiscal and monetary solutions to stimulate
aggregate demand, removing difficulties for economic production. key businesses,
industries, and sectors, to promote growth and minimize the impact of epidemics. To
have appropriate solutions to both promote export and strongly develop the domestic
market.
● Second, Vietnam needs to promote trade promotion, expand and diversify export and
import markets, not to depend too much on one market. Over-reliance on a market
will be an economic dead point that must be avoided. The opportunities from the
most signed free trade agreements, namely CPTPP and EVFTA, need to be utilized
better and more effectively.
● Next, it is necessary to focus on improving the efficiency of investment capital,
especially public investment; continue promoting the restructuring of credit
institutions, handling bad debts, especially weak commercial banks, ensuring the
safety of the system. Policies that need reform involve many issues, such as:
investing in infrastructure and promoting connectivity; adapt to climate change; to
train and maintain highly skilled human resources.
● Finally, in recent times, many countries around the world have made a race to reduce
interest rates to stimulate the economy, including the US, Europe, Japan and other
countries. The State Bank of Vietnam needs to be more drastic in cutting operating
rates, thereby reducing deposit rates and lending rates of commercial banks. A
favorable condition for implementing a sharp reduction in interest rates is that
inflation in 2019 is at a very low level of 2.79% (the lowest in more than 10 years).
The lowering of interest rates not only stimulates investment but also stimulates
consumption. Currently, Vietnamese firms have to borrow at much higher interest
rates (Figure A) than other countries in the region. Obviously, this is a negative
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 factor that increases the costs of Vietnamese businesses. In addition, high interest
rates are also a burden on the state budget.

V. Conclusion
During the epidemic, Vietnam is experiencing the positive aspect of increasing economic
growth but is still struggling with some problems and risks because the disease has hardly
been controlled in the world. Vietnamese government has been strived to mitigate the
COVID19 and its severe effects. In the future, when vaccine is invented, the economy will
recover from recession. The dynamic global integration will return and Vietnam with the
advantages and potentials will have further development than ever.

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REFERENCES
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h-kinh-te-xa-hoi-quy-iv-va-nam-2019/ 

Gita Gopinath (Insights & Analysis on Economics & Finance) . The Great Lockdown: Worst
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General statistics office. Vietnam's economy in 2020 is the growth of a year with full of
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th-of-a-year-with-full-of-bravery/ 

Chief Editor (The Indochina). Vietnam leads the way as Asia’s top performer in 2020.
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Tổng cục thống kê. Báo cáo tình hình kinh tế – xã hội quý IV và năm 2020. Retrieved from
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CEIC. Vietnam Nominal GDP. Retrieved from

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https://www.ceicdata.com/en/indicator/vietnam/nominal-gdp#:~:text=Vietnam%20Nominal
%20GDP%20reached%20271.2,bn%20in%20the%20previous%20year.
 
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https://www.ceicdata.com/en/indicator/vietnam/gdp-deflator-growth
 
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