Can Van Luc, chief economist of public lender BIDV, said at an economic forum on Monday that the severe impacts of the Covid-19 pandemic and the social distancing campaign that followed were the main contributors to the fall of the third trimester in HCMC.
If the prediction comes true, it would be the first time since 2000 that Vietnam has recorded negative quarterly GDP growth.
Service revenues could fall more than 10% in the third quarter, while some industries like footwear and beverages saw negative growth of 28% and 23% respectively in August.
“A possible negative growth in the third quarter shows that this is the most difficult period for the economy, as social distancing measures in 25 localities, including Hanoi and Ho Chi Minh City have had a direct impact on manufacturing and services, ”said Luc.
Other experts at the forum expressed similar concerns about the economy.
Vu Thanh Tu Anh, dean of the Fulbright School of Public Policy and Management, said GDP growth will be relatively weak in the third quarter due to the impacts of Covid-19, but did not specify a figure.
Retail sales in July fell about 20% year-on-year and 33% in August, showing that the disease caused serious damage to the economy in the third quarter and that this could continue into the over the next few quarters, he said.
Many people have lost their jobs, temporarily or not, as many companies suspend operations or withdraw from the market, he added.
“If we do not partially reopen the economy and resume transportation activities, there is a high risk that the supply chain will be disrupted.”
However, Tu Anh also said he expects the economy to recover in the last quarter of the year as investment and consumption demand rebounds after a long period of restrictions.
The Ministry of Planning and Investment’s growth target of 3.5 to 4 percent for this year is “fully achievable,” he said.
Growth in the last quarter is expected to reach 5% for full-year growth to reach 3.5%, he added.
Inflation is expected to peak at 2.7%, against the target of less than 4%, as consumer demand is currently weak, he said.
Vo Tri Thanh, former deputy director of the Central Institute of Economic Management (CIEM), said that an economic stimulus plan needs to be improved in institutions, business environment, investments, infrastructure, digital transformation and support for businesses and work.
Thanh also said the country is expected to be able to catch up with the speed of recovery of neighboring countries and strategic partners over the next two years.
Labor issues must be prioritized, he said, noting that in HCMC alone, it would take around two years for the labor pool to return to pre-pandemic proportions.