The Vietnamese government is planning to issue a variety of incentives to dampen the economic impact of the COVID-19 outbreak. Recently the Prime Minister issued Directive 11 on measures to help businesses affected by the pandemic.
The incentives will include providing tax breaks, delaying tax payments, and land-use fees for businesses, costing the government US$1.16 billion (VND 27 trillion). Vietnam’s central bank, State Bank of Vietnam (SVB) has already cut interest rates from February 2020.
With the onset of COVID-19, Vietnamese businesses, especially those in the manufacturing sector, are experiencing a slowdown or work stoppages in production, due to the lack of raw materials from China. The country is a major supplier of steel and components for electronics, automobiles, and phone manufacturers in Vietnam.
It is estimated that 17 percent of Vietnam’s economy is exposed to trade with China, making it the highest in the region. 30 percent of the components used for manufacturers in Vietnam, comes from China, while some 32 percent of all tourists coming to Vietnam are from China. Additionally, 20 percent of the country’s agricultural exports go to its northern neighbor.
The government has targeted the economic growth for 2020 to be 6.8 percent but has warned that if disruptions to supply chains continue due to the virus, then growth could slow to 5.96 percent.
Before the COVID-19 outbreak, Vietnam was one of the main beneficiaries of the US-China trade war, with a growing number of Chinese companies moving their operations into the country.
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