Credendo Insurance Group highlights Vietnamese economic success amid COVID-19

The article cited the latest country study of Credendo, saying that the nation has been one of the few highly-resilient places during the unprecedented shock of COVID-19.

The fast, strict, and hugely-effective containment of the virus following the outbreak in neighbouring China largely explains this, the report states, noting that an early travel ban, coupled with testing and wide-scale contact tracing on top of containment measures, have helped to keep the virus under control.

While the majority of countries were severely hit and hindered by the economic impact of the virus, the Vietnamese economy has continued to operate at a steady albeit slower pace, despite an initial period of widespread disruption for business, it said.

Credeno's study indicates that last year saw the nation enjoy an exceptional economic performance, while advanced and emerging economies globally suffered a record recession.

The report outlines that for the country, the global demand slump was more than offset by the surge in global demand for medical products, electronics, and computers caused by the COVID-19 crisis, thereby resulting in the export of goods to grow last year.

Furthermore, increased public investment in infrastructure also played a significant role in supporting economic activity. In addition, a more accommodative monetary policy such as the State Bank of Vietnam’s move to cut interest rates from 6% to 4% brought about an extra stimulus.

According to Credendo, the nation remains largely immune to further waves of the virus that are currently impacting many parts of the world, with the Vietnamese authorities set to take time to vaccinate the wider population. 

Moving forward, the country is confidently looking ahead to continue its economic success story, particularly as it has been characterised by an average growth rate of 6.8% over the past two decades.

The study emphasised that an impressive outcome amid COVID-19 lies in the fact that Vietnamese economic and financial risks have not increased. Even though GDP growth reached its lowest level since the mid-1980s, it remained in positive territory last year in contrast to most of the country’s peers in the region. This is expected to accelerate strongly this year and towards 6.5%.

Moreover, the nation’s external debt ratio remains low and debt service has barely increased, whereas the current account surplus is persisting despite some narrowing, the report outlines. Whilst post-COVID-19 prospects remain positive, there still remains some risk factors on the back of a global economic recovery. 

Most notably, the country has been benefiting from the changing commercial environment and ongoing supply chain re-organisation.
The study indicates that while COVID-19 has shaken global supply chains, which could be beneficial in the long term, the nation can be viewed as a stable investment location for business relocation in Southeast Asia.

The implementation of free trade agreements (FTAs) that signed by the country in the 2019 to 2020 period, such as the European Union-Vietnam FTA (EVFTA) and the Regional Comprehensive Economic Partnership agreement (RCEP), will help to boost its trade and FDI inflows.

Over recent years, the nation has become a magnet for the world’s biggest multinationals such as Samsung and Apple, which are attracted by strong growth prospects, a low-cost workforce, and an investment-friendly climate, which many choosing to set up large manufacturing sites.        

Credendo also emphasised that at the 13th National Congress of the Communist Party of Vietnam, which ended in early February, the general political direction for the coming years was confirmed. Moving forward will see the economy and its continued liberalisation as a key priority and guarantor of the stability of the one-party regime. 

During the COVID-19 pandemic, Credendo kept its political risk ratings unchanged. The ST political risk rating is likely to remain at a solid 2/7 thanks to resilient liquidity. It therefore forecast that the assessment will be improved further after the COVID-19 pandemic ends, the global economic situation returns to normal, and strong Vietnamese economic momentum resumes. 

Credendo is a European credit insurance group with offices across the world. The group operates in all areas of commercial credit insurance and political risk insurance, as well as providing risk insurance products globally.