15/12/2018
The Covid-19 epidemic is breaking out violently in Vietnam and placing us in enormous challenges. By the end of this week, more than 20 provinces and cities in Vietnam were forced to implement social distancing under Directive 16 of the Government, including the two largest cities in the country, Hanoi and Ho Chi Minh City. The number of new infections is also constantly increasing and reaching over 7,000 cases per day.
These developments show that Vietnam is struggling with the unprecedented spread of the disease. How will this epidemic affect the economy in general and Vietnam's real estate market in particular?
The Covid -19 pandemic has spread globally and is an unprecedented pandemic since World War II until now. Most of the economies have declined sharply, all economic and social activities seem to have turned upside down. According to statistics to date, the world has more than 200 million people infected and more than 4 million deaths related to the Covid-19 epidemic. The total number of currently being treated infections is about 12 million people. The number of infected people in India, Indonesia and Latin America continues to be very high.
However, the epidemic situation has improved when the covid-19 vaccine was quickly produced and widely vaccinated in many countries. In developed countries, the number of people vaccinated has largely reached over 60% and the epidemic situation is under control.
For the economy after a sharp decline in the second quarter of 2020, despite having to deal with the spread of the disease, most of the economy has gradually recovered from the third quarter of 2020. 2020, GDP of most countries growth has been negative, even deeply negative at 3-7% in developed countries in Europe, the US, and Japan. In summary, in 2020, the global economy will shrink by about 3.5%, and global trade will decrease by 8%.
(The World Bank forecasts that Vietnam's GDP will grow very positively and be one of the countries with the highest growth rates in the world.)
However, the positive news is that the global economy is showing strong signs of recovery. According to the World Bank's forecast, the global economic growth in 2021 could reach 5.6%. The main growth driver of the global economy is the strong economic recovery of the US and China. Many economic activities in many countries are gradually returning to normal. The demand for goods increased sharply, causing the prices of many items to increase, and the sea freight rate also increased rapidly.
The deeper reason for this recovery is the great progress in the production of vaccines for this viral disease. Currently, there are about 10 vaccines that have been approved for emergency circulation. Statistics show that worldwide, about 3.8 billion doses of vaccines have been administered. Every day, about 30.8 million vaccines are administered. Most developed countries have vaccination rates above 50%, even reaching over 70%. The most populous country in the world is China, so far, the vaccination rate has reached 43%, India reached 22.27%, Indonesia and Thailand reached about 14%. Vietnam is in the group with the lowest vaccination rate at about 4%.
The prospect of controlling the Covid-19 epidemic in the world is very bright. Many countries in Europe have reopened almost all economic activities to normal levels. The epidemic is no longer the biggest concern of the people in the current period. Countries are rapidly deploying “vaccine passports” to boost cross-border activities. The tourism, service and air transport sectors are on an impressive recovery track.
In fact, the world economy started to recover strongly from the third quarter of 2020 right at the time when the epidemic was still breaking out violently. However, due to the previous sharp decline, by the end of 2020, most of the economies will only shrink by 6-7%. Currently, most of the economy has grown strongly again and will recover to before the outbreak of the pandemic by the end of this year.
The reason that the economies did not suffer a prolonged recession was because the Governments took strong action in combating the economic downturn. Most countries accept a high budget deficit to release money to support people by distributing money directly to people, reducing taxes and loosening loan conditions. This policy has maintained purchasing power in the economy, helping the demand for goods to quickly recover when the pandemic is gradually under control.
Regarding monetary policy, central banks also increased support for the financial system by bringing policy interest rates to very low levels and increasing money injection through the open market to maintain liquidity for the financial system. . Therefore, despite the economic downturn, businesses face difficulties, but the number of bankrupt enterprises is not high and there is no financial crisis. This helps businesses maintain production capacity to quickly recover after the epidemic is under control.
According to the latest forecast of the World Bank, the world economic outlook in the coming time is quite positive. Global GDP in 2021 could recover 5.6%, after shrinking about 3.5% the previous year. In 2022 and 2023, the global economy will continue to grow by 4.3 and 3.1%.
(Economics in 2021 will have a very strong recovery because the epidemic is basically under control. However, there is no uniform recovery in countries. Low-income countries have difficulty in continuing. vaccine will recover more slowly).
The countries that are leading the world economic recovery are the United States and China. Consumer demand in these countries is growing strongly and manufacturing activity is gradually returning to normal. Specifically, the US economy is forecasted to grow by 6.8%, Europe by 4.2%, China by 8.5%.
Global trade is also forecast to increase strongly in this regard. This is most evident in the sharp increase in the price of goods and sea freight. The World Bank also forecasts that global trade in 2021 could increase by more than 10%.
The World Bank's forecasts are completely grounded by the actual situation as well as the experience of recovering from crises in previous years. However, the WB also warned that this recovery is not uniform across countries. In low-income countries and developing countries, the recovery will be more difficult because vaccination on a large scale has not been implemented yet.
Vietnam's economy has made positive changes in the first 6 months of the year. GDP increased by 5.64% and exports increased by 28.4%, imports increased by 36.1%. This is quite a positive result while some localities of Vietnam have had an outbreak of disease and have greatly affected production such as in Hai Duong, Bac Giang, Thai Nguyen, Da Nang, and Ho Chi Minh City....
Before that, in 2020, Vietnam became one of the fastest growing economies in the world due to the control of the epidemic. Vietnam benefits from production activities in many countries being disrupted by the epidemic and the intense Sino-US trade war. GDP growth in 2020 will still reach 2.91% despite a decline of nearly 5% in the world economy.
Source: Collected by CafeLand
Currently, the disease is increasing rapidly and spreading to many provinces and cities across the country. In particular, the locality with the largest economy in the country is Ho Chi Minh City, Binh Duong, Dong Nai, Hanoi and some neighboring provinces are struggling to fight the disease. A lot of economic activity has come to a halt. It is expected that the epidemic situation will continue to be severe for at least the next few months.
Currently, more than 20 provinces and cities across the country are having to implement social distancing under Directive 16, of which the two largest economic centers are Hanoi and Ho Chi Minh City. The implementation of social distancing not only seriously affects service economic activities but also manufacturing industries. Many factories in the industrial center of the country such as Dong Nai, Long An, Binh Duong and some areas around Hanoi were forced to close and stop production. The movement of goods between regions is facing many difficulties. Surely this will seriously affect Vietnam's economy in the last months of the year.
Forecasting the economic prospects in 2021, recently, the authors of the BIDV Training and Research Institute assessed that this epidemic has many negative impacts on the economy. However, in the base scenario, the expert group still forecasts GDP growth of 5.8 - 6% in 2021, lower than the level of 6.1 - 6.3% they suggested at the beginning of June and the level 6. .5 - 7% forecast at the beginning of the year. The most negative scenario that this research group offers is GDP growth of 5.1-5.3%.
At the beginning of July, the Prime Minister also announced that he had agreed not to change the set target and agreed with two growth scenarios developed by the Ministry of Planning and Investment with scenario 1 increasing by 6% and developing by 6%. Scenario 2 increases by 6.5%.
Thus, just achieving the worst scenario according to the research team of BIDV is also considered a good achievement in the current context. In fact, the target of growth above 5% is very difficult to achieve because the epidemic is breaking out fiercely and spreading across the country. A lot of economic activity is at a standstill, so it's not surprising that the third quarter of this year GDP growth is negative.
Although the economy had a sharp decline, it recovered quite quickly as the number of infections in many countries was still very high. In particular, the global financial system remained resilient and did not lead to a crisis in the financial markets. Governments and central banks were quick to move beyond the usual rules of economic management in response to the emergency. With vaccination being widely practiced, it is clear that the recovery scenario of the economies is quite solid.
The financial market has also experienced spectacular growth in recent years. The global stock market rose sharply, and real estate prices everywhere also continuously set new peaks. The policy of low interest rates has stimulated a strong inflow of money and these highly speculative assets. So far, although there are still some concerns about inflation and budget deficit, there is no sign that real estate or stock prices will fall deeply.
Going back to the situation in Vietnam with experience in other countries shows that once the disease has spread, it is very difficult to control it completely. However, even in this situation the economy can still grow at a certain rate. Especially once the vaccine is used to vaccinate widely, disease control will not be too complicated and the economy will gradually reopen.
Thus, with the current rate of vaccination, Vietnam can reach the threshold of 30-50% vaccination rate in some important areas in the fourth quarter of 2021. At that time, the economy will gradually return to normal and regain growth momentum.
For the financial system, the Government and the State Bank of Vietnam will certainly have many support measures. With inflation still at a relatively low level, the plan to lower interest rates and freeze debts for businesses in difficulty will certainly soon apply. Once the financial system holds up, the crisis will soon be under control and the economy will soon recover.
As for the real estate market, although the current transaction is temporarily frozen and housing prices in many places are considered too high, the prospect of the real estate market is still quite positive. The Government's continued investment in infrastructure will be one of the big drivers for real estate in some areas. Besides, like many countries, the low interest rate policy will very well support the real estate market to continue to thrive in the coming years.
Source: CafeLand
