With rising global health and economicconcerns, Vietnam economy is expected to be significantlyaffected, even though the COVID 19 health crisis has been sofar contained, with only 240 cases of infected people and noregistered death as of early April. The World Bank’s GDPgrowth forecast for Vietnam has been cut by half compared topre-crisis projections, with new forecast at 3.0 percent in2020. Both the fiscal and external accounts are expected todeteriorate, creating a fiscal financing gap ofapproximately 5 billion dollars that will require newborrowings. The Government’s fiscal response, a combinationof tax and social protection measures, is expected toattenuate the short-term economic costs associated to theCOVID 19 pandemic, but the key challenges will be the rapidand effective implementation of the above measures andpreparing the economy for the expected rebound when thehealth crisis is contained. Easing monetary and creditpolicies creates a welcome buffer to the affectedbusinesses, but close monitoring is required as banks becomeincreasingly exposed to the economic slowdown, affectingtheir asset quality, liability, and profitability over time.Potential areas for collaboration between the Government andthe World Bank could include (i) macro and fiscalmonitoring; (ii) implementation of social protectionmeasures; and (iii) reforms to be implemented for optimizingthe rebound of the economy.
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