Investment & Finance

Four post Covid-19 economic recovery scenarios

(ĐTTCO) - Finance experts are already looking into the most rapid and feasible plans for economic recovery in the aftermath of the Covid-19 pandemic in Vietnam. As seen in previous economic crisis and recessions, the economists and finance experts have not always followed the same pattern to uplift the economy in Vietnam.

Four post Covid-19 economic recovery scenarios

By studying the planned and efficient response to two scenarios of the Covid-19 pandemic in Vietnam, namely, the spread of the disease, and the response in tackling it, four most highly applicable recovery scenarios could present in the current economic situation. These economic recovery scenarios can be categorized as V, U, L and W models.

The V-model scenario for bringing in good results soon after the pandemic is contained would be applicable towards the end of the pandemic, in the second quarter of the year. This would be in the form of economic stimulus measures, strong institutional reforms and a simultaneous fast recovery of the world economy. The U-model scenario would apply in the third quarter, with stimulus measures close to the threshold that would be relatively effective, and institutional reforms could be implemented in some areas, provided the world economy does not fall into recession but recovers slowly.

The L-model scenario will occur when the pandemic ends in the third or fourth quarter, and there will be inadequate or ineffective measures along with slow or ineffective reforms, which could cause a crisis and the world economy, including the economy of Vietnam, is severely affected, and only shows very slow recovery. In the case of the W-model scenario, the economy will recover well and steadily. This can occur if the pandemic ends in the second quarter, but may break out again in early 2021, but the stimulus and reform measures in 2020 bring good results, creating a strong buffer for any eventuality in 2021.

Based on earlier case scenarios, experience of spread of a disease, and the ability of Vietnam to cope with it, the V-model scenario seems the most probable in Vietnam's economy. In previous flu epidemics it was seen that infections came down during the summer months and subsequently ended an epidemic. The Vietnamese Government has shown great determination to continue to promote economic growth, even as the current pandemic continues to rage on. As the world economy also begins to make a recovery, with markets in the US, Europe and China also simultaneously stimulating their markets, Vietnamese exports will again be able to pick up and consolidate in global export markets.

If the V-model scenario occurs, Vietnam and the global economy will bottom out in the second quarter with a huge decline due to global resonance. When the pandemic is finally brought under control in the summer months, and the stimulus proves effective, growth will be visible in the third quarter and begin to strengthen by the fourth quarter. By the first half of 2021, economic growth is likely to be very high, and from the second half of 2021, growth will return to a stable trajectory. If the stimulus and reform measures taken in 2020 are really effective, growth from 2022 onwards will be very positive. In the recession period during 2018-2019, the growth rate had reached 7%, but by 2022 it may be over 7.5% and continue to increase steadily.

Despite the V-model scenario being the most likely, it cannot be termed the better scenario from the other three. The probable balance in success ratio would be 35% for V-plan, 25% for U-plan, 25% for L-plan, and 15% for W-plan. It is also possible that the recovery is not quite the same in any of these four models, because the disease is difficult to predict and the health of the world bank cannot be assessed specifically and remains uncertain. Even when the Covid-19 pandemic finally ends, other factors such as the US elections, US-China trade dispute, and various changes in FDI investment strategies, will continue to influence economic recovery in general.

Huynh Tan Dat (SSI)

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