Summary
The emergence of COVID-19 has fundamentally changed global operations. Faced with the pandemic’s long-term impacts, countries must address issues related to economic recovery, healthcare, education, climate, national security, and building public trust. Among these, the top priority for nations is post-COVID-19 economic recovery. Lessons from Israel, the United States, Germany, and China highlight the need for a close combination of public health measures with timely fiscal and monetary policies to simultaneously curb virus spread and maintain economic stability.
As of now, Vietnam has experienced four waves of infection since the first case on January 23, 2020. However, Vietnam’s vaccination rate remains lower than the global average. This has significantly impacted Vietnam’s economy, leading to business closures and layoffs, particularly affecting the working-age population. To help the economy overcome these challenges, the Vietnamese government has introduced several support packages. The majority of these funds are directly allocated to financially assist vulnerable companies and individuals, amounting to approximately 0.982% of GDP. About three-quarters of this funding comes directly from the state budget (including reserves from the Unemployment Insurance Fund), while the remainder combines deferred collateral payments and loans for affected businesses (World Bank Group, 2020).
This policy analysis proposes several necessary measures for economic recovery and development, including: (1) healthcare investment, (2) leveraging digital technology in disease prevention, (3) allowing the private sector to participate in the vaccine delivery process, (4) increasing the value of support packages, (5) focus on supporting workers during difficult times, (6) mobilizing support costs, and (7) other actions to support post-COVID-19 economic recovery. Cụ thể như sau:
Until effective treatments or widespread global vaccination are available, public health measures will remain crucial in combating the virus[1] (OECD, 2020). Specifically, Vietnam should swiftly enhance its pandemic resilience through investments in healthcare infrastructure and personnel.
Integrating digital technology into pandemic control is a common strategy among countries successfully managing COVID-19 (Whitelaw, Mamas, Topol, & Van Spall, 2020). To address existing gaps in Vietnam’s digital response, clear guidelines and communication are necessary before implementing or modifying regulations. Additionally, Vietnam should use technology devices for monitoring and managing home quarantine (F0, F1) and patient tracking to facilitate timely treatment.
As global vaccine supply improves, involving the private sector in COVID-19 vaccine distribution is essential to overcome bottlenecks and ensure rapid vaccine availability (David, Anna, Sneha, & Andreas, 2021). Private entities can participate in vaccine production or directly contribute to vaccine supply. Furthermore, they can assist the government in vaccine procurement, supply chain management, and infrastructure for storage, transportation, and distribution. To accelerate vaccination and achieve herd immunity, the Ministry of Health and the Vietnamese government may consider allowing qualified units and hospitals to administer vaccination services. Transparency in this process can be enhanced through clear legal regulations.
The allocation of Vietnam’s budget for COVID-related solutions accounts for only 1.7% of GDP, which is lower than the average for Low-Income Developing Countries (LIDCs). Consequently, Vietnam could increase the value of support packages to match the ASEAN-5 regional average (comprising countries with similar levels of economic development), which corresponds to 5.1% of GDP. However, in principle, fiscal stimulus policies aimed at economic growth may lead to increased debt and rising government bond interest rates. A combination of monetary and fiscal policies is necessary to minimize the entanglement of interest rate hikes and debt repayment. Lessons from the United States and other developed nations emphasize that Vietnam should exercise caution in implementing effective fiscal measures to stabilize macroeconomic conditions in the future.
Support policies for informal and unemployed workers due to COVID-19 are essential and urgent. After careful calculation, the authors propose three support scenarios: (1) Positive scenario with total support expenditure equivalent to 0.46% of GDP in 2020; (2) Baseline scenario corresponding to 0.91% of GDP; and (3) Negative scenario with support level equivalent to 3.30% of GDP.
To finance these fiscal expenditure packages, the government can mobilize financial resources through issuing government bonds in both international and domestic capital markets. Additionally, Vietnam can tap into borrowing from international organizations such as the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB), and concessional loans (ODA). Alongside these funding mechanisms, national reserves also play a crucial role in supporting COVID-19 prevention and control.
For post-COVID-19 economic recovery, Vietnam should encourage and invest in promising areas such as e-commerce. Building a digital economy based on government support platforms is essential (World Bank Group, 2020). State-owned banks and public investment will continue to play a vital role in recovery and reconstruction after COVID (United Nations, 2020). Furthermore, policies should incentivize and empower the private sector to focus on domestic economic strengths, including greater decentralization to local authorities (Shannon & Carlson, 2021).
Authors:
Dr. Vo Tat Thang, Nguyen Thi Hong Ngoc,
Nguyen Thi Bich Hien, Nguyen Hoang Lan, Truong Tran Minh Thu
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HAPRI POLICY DISCUSSION SERIES 30/08/2021
----------------------------------------------------------- [1] i) Large-scale testing, contact tracing, and isolation of infected individuals are essential; ii) Maintaining hygiene practices, wearing masks; iii) Providing personal protective equipment for healthcare workers are crucial; iv) Continuing preventive measures, such as avoiding large gatherings and promoting remote work.
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