Vietnam posts record GDP slump as Covid-19 curbs punish economy

About 94 per cent of Vietnam's companies are facing "difficulties", such as labour shortages and higher costs for wages.
About 94 per cent of Vietnam's companies are facing "difficulties", such as labour shortages and higher costs for wages.PHOTO: AFP

HANOI (BLOOMBERG) - Vietnam's economy shrank by the most on record as its tough anti-virus policies impacted almost every aspect, disrupting supply chains, shuttering factories and crimping output.

Gross domestic product (GDP) in the third quarter slumped 6.17 per cent from a year earlier, the General Statistics Office said on Wednesday (Sept 29), adding that it is the worst performance since it started tracking the figure.

That compares with a median estimate in a Bloomberg survey for growth of 2.25 per cent and a revised 6.57 per cent expansion in the second quarter.

The authorities have imposed tough measures for months to contain the Covid-19 spread, ranging from ordering factories to shut down if they cannot provide sleeping arrangements for workers to barring residents in the nation's commercial hub of Ho Chi Minh City from shopping for food.

About 94 per cent of the country's companies are facing "difficulties", Mr Pham Dinh Thuy, head of industrial statistics, said at a briefing, citing supply chain disruptions, labour shortages and higher costs for wages and worker accommodations.

"Companies are exhausted," Mr Thuy said. "The government is working on multiple measures to help quickly get companies and businesses back to normal operations."

Mr Nguyen Anh Duc, head of institutional sales at SSI Securities, said the relatively benign market reaction is due to government easing of tough anti-virus restrictions in Hanoi, Ho Chi Minh City and other southern industrial regions amid a rise in vaccinations.

"If the government keeps up its pace of vaccinations, it is reasonable to believe that the economy will start recovering," Mr Duc said. "If the virus is well controlled, the economy will recover rapidly next year."

About 8.8 per cent of the nation's population has been fully vaccinated, according to the health ministry. In Ho Chi Minh City, more than 29 per cent of residents were fully vaccinated as at Monday.

Export snags

The South-east Asian country, which was successful at curbing infections during the early stage of the pandemic, now sees its export-dependent economy at risk.

Full-year growth may run 3.5 per cent to 4 per cent, according to planning and investment ministry estimates, significantly lower than the government's initial target of about 6.5 per cent.

The economy expanded 1.42 per cent during the first nine months of the year, the statistics office said on Wednesday.

Virus measures have shuttered factories across the southern economic core around Ho Chi Minh City, particularly clothing and shoe manufacturers with clients that include Urban Outfitters, Nike and Abercrombie & Fitch.

Meanwhile, some higher-end technology manufacturers have been able to keep running with smaller, isolated workforces.

Exports fell 0.6 per cent this month compared with a year earlier, while imports climbed 9.5 per cent.

Consumer prices rose 2.06 per cent this month from a year earlier. The government aims to cap average inflation at 4 per cent this year.