Growth in agriculture stagnated because of lower demand for agricultural exports and severe salinity intrusion in the Mekong Delta. Growth in services, the sector hardest hit by the pandemic, was halved to 3.2 per cent in the first quarter of 2020, down from 6.5 per cent in the corresponding period in 2019.

To support economic activity, in early March the government unveiled a $10.8 billion (0.4 per cent of gross domestic product) credit relief package to assist debt restructuring and lower interest rates and fees. The government also launched a fiscal package worth $1.3 billion that reduces taxes and fees for affected firms and defers tax payment, and the fiscal support is expected to rise. The central bank also cut policy rates by 0.5-1 per cent, lowered interest rate caps on dong deposits of less than six months and on short-term dong lending to prioritised sectors.

The economy’s fundamentals remain resilient, according to ADB’s flagship annual economic publication, the Asian Development Outlook (ADO) 2020. If the pandemic is contained within the first half of 2020, growth should rebound to 6.8 per cent in 2021 – the ADB’s pre-COVID-19 forecast for Vietnam in 2020 – and remain strong over the medium and long-term.

“Despite the deceleration in economic activity and the downside risks posed by the COVID-19 pandemic, Vietnam’s economic growth is projected to remain one of the highest in Southeast Asia,” said ADB country director for Vietnam Eric Sidgwick.

Drivers of economic growth – a growing middle-income class and a dynamic private sector – remain robust. The country’s business environment continues to improve. Public spending to combat the impact of the pandemic, which rose significantly in January and February, will likely be raised further.