Vietnam is set to lose billions of dollars due to coronavirus, and it’s already feeling the impact of the deadly outbreak

lovesac factory mask

All workers and visitors at Tan Hoang Gia Trading Co. in Ho Chi Minh City are required to wear masks.Kate Taylor/Business Insider

As the official count of confirmed cases of COVID-19 — the respiratory illness causes by coronavirus — continues to climb, Vietnam is feeling the economic impact.

Many factories such as Tan Hoang Gia Trading Co., which typically imports plywood from China, have been unable to get materials from the country. With borders partially closed, companies that export to China have struggled to sell their goods.

Chinese visitors, who typically make up about a third of tourists to the country, are scarce. And, at least a few businesses are trying to bar any Chinese customers from entering, out of fear of the coronavirus spreading.

On February 14, the Vietnamese government announced it would not lower its economic growth target for 2020. As of Monday, there are 16 confirmed cases of COVID-19 in Vietnam; globally, there have been more than 76,000 total cases and more than 2,200 deaths.

The coronavirus could cause Vietnam’s GDP growth rate to drop by around one percentage point for the year, despite the government’s current refusal to lower its target.

ho chi minh city motorbikes

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Former Vietnamese government adviser Le Dang Doanh told Business Insider that Vietnam’s economy has been negatively affected across numerous sectors, including exports to and imports from China, tourism, and transportation services such as airlines and trains.

“The government still keeps the growth target unchanged,” Doanh, who served as a member of the UN Committee for Development Policy from 2016 to 2018, said in an email. “But I think the GDP growth rate of Vietnam’s economy in 2020 should be reduced by ca. 1 from the 6.9% target, maybe to around 6.0-5.9%.”

Multiple sectors are taking an economic hit.

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Stephen Wyatt, the country head of Jones Lang LaSalle Vietnam, said that at the moment, the real-estate firm has seen fairly little long-term impact from a business point of view.

However, Wyatt said, the coronavirus has had a clear, immediate impact on certain sectors. Annual conferences and large-scale events have been cancelled. According to Wyatt, foot traffic in shopping centers has dropped, as people do not want to be in public spaces where they could be infected.

There has also been a dramatic drop in tourism.

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A guide leads a boat tour in the Mekong Delta.
Kate Taylor/Business Insider

“We’ve been talking to a number of the hotel groups and their numbers are down quite significantly — 30%, 40%, 50%, 60% down on year-over-year figures,” in Vietnam, Wyatt said.

Vietnam’s department of tourism is prepared for the country to lose billions of dollars as people cancel plans and avoid travel.

“In three months, the estimated direct damage to Vietnam’s tourism industry could reach between $3 and $4 billion,” a representative for the country’s department of tourism said.

Chinese visitors typically make up roughly a third of all international tourists in Vietnam. Recently, that figure has dropped to almost nothing due to China banning travel and Vietnam barring the entry of travelers from areas affected by the outbreak.

Potential visitors from other countries are also avoiding Vietnam, due to concerns about traveling in Asia during the outbreak, according to the department of tourism.

Imports and exports are significantly down.

coronavirus ho chi minh city

Kate Taylor/Business Insider

On Thursday, Vietnam announced it had eased its restrictions on trade with China, attempting to assist businesses impacted by the coronavirus.

Retailers are also likely to be negatively impacted.

coronavirus ho chi minh

Kate Taylor/Business Insider

In a note on Wednesday, Cowen analyst Oliver Chen predicted that coronavirus would have a “material” impact in the first quarter for retailers that do substantial businesses in China, and that neighboring countries will likely be affected as well.

“We believe the coronavirus illness will substantially curtail store traffic in China and neighboring countries, may negatively affect incoming Chinese tourism, and is also likely to disrupt supply chains,” Chen wrote.

Yet, there could be a silver lining for the Vietnamese economy.

lovesac factory mask

Kate Taylor/Business Insider

Despite the negatives, Wyatt believes that coronavirus has the potential to create some economic opportunities in Vietnam. Supply-chain issues in China might help manufacturers decide to move more production into Vietnam, continuing a trend sparked in part by Vietnam’s cheaper labor market and the US-China trade war.

“Positive side could be, for Vietnam, that we’re going to see that continued movement of businesses wanting to relocate out of China,” Wyatt said.

 

Source: Business Insider
Vietnam is set to lose billions of dollars due to coronavirus, and it’s already feeling the impact of the deadly outbreak