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In July, Vietnam’s was able to maintain its merchandise trade surplus with a monthly surplus of $1.6 billion, yielding a surplus of $9.4 billion for first seven months of 2020, up from $3.3 billion over the same period in 2019.

Vietnam’s Export Equivalent to Same Period Despite Turbulence
In July, the economy continued its road to recovery with reported increases in domestic manufacturing and retail sales of 2.1% (y/y) and 4.6% (y/y), respectively, in line with the easing of social distancing and mobility restrictions, but still lower that the growth rates registered during the same period of 2019.
Showing an unexpected degree of resilience in the depressed international context, Vietnam’s export performance was robust (approximately at the same level than in July 2019) thanks to domestic rather foreign owned firms, while FDI inflows was down only by approximately 7 percent during the first seven months of the year.
Inflation increased slightly to 3.4% (y/y) in July, mostly due to higher prices of food products while transport prices declined.
The expansion of the credit to the economy has slowed substantially, below 10 % in recent months, reflecting the decline in economic activity despite State Bank of Vietnam (SBV) policy to reduce interest rates and to encourage commercial credit.
Widening of the fiscal deficit is expected as, during the first half of the year, only 76% of the revenue reported for the same period in 2019 was collected by the Government. Concurrently, expenditures increased due to the social measures implemented to alleviate the effects of the crisis and efforts to accelerate the execution of the investment program to stimulate the recovery.
Looking ahead, the resurgence of community driven COVID-19 infections and new stringency measures, especially in Danang, will certainly impact the pace of recovery of the economy. Such negative impact might be partially compensated by the Government’s effort to accelerate the execution of its investment program, notably in provinces.
As of August 11, the country registered 847 infections and 15 deaths mostly as the result of the new wave of community driven infections in the Danang region. After almost 100 days of zero community driven infections, Vietnam declared its first new community case on July 25. Since then, 389 new cases have been reported, mainly in the Da Nang City (271), Quang Nam province (74) and neighboring provinces but also in HCMC and Hanoi.
Testing and tracing have intensified, with 182,267 people being medically monitored and quarantined, including 5,139 at hospitals, 28,408 at centralized quarantine camps, and 148,720 at their places of residence.
After three weeks of intensive lockdown in April, the Government gradually eased social distancing and mobility restrictions, up to the recent COVID-19 outbreak in Danang at the end of July. Over the past few days, the Government has reintroduced stringent mobility restriction measures in Danang while increasing social distancing in other cities. The recent increase in the national stringency index and the sharp decline in the number of domestic flights since early August are reflected in the related graph.
Prior to the recent outbreak, the domestic economy continued its rebound with the industrial production index (IPI) up 2.5% (y/y) in July. The rate of expansion was nonetheless slightly lower than the reported in May and June. Similarly, retail sales of goods and services continued to recover, growing by 4.6% (y/y). 
Both manufacturing and retail sales reported year-on-year growth rates lower than their respective growth rates in June 2019, indicating that the economy had not yet fully bounced back to its pre-crisis activity levels.
In July, Vietnam’s was able to maintain its merchandise trade surplus with a monthly surplus of $1.6 billion, yielding a surplus of $9.4 billion for first seven months of 2020, up from $3.3 billion over the same period in 2019. The value of total exports slipped 1.4% compared to June 2020 but is comparable to July 2019. 
Exports performance of the domestic economic sector shows stronger signs of recovery (up by 10.6%) while foreign owned exporters suffered a decline in the sales of approximately 5% compared to one year ago. While most destination markets declined, increases were reported for the US, EU and Japan in July. 
Overall import values increased 2.0% compared to June 2019 but are still about 3.6% lower than in July 2019. International tourist arrivals to Vietnam in the first seven months of 2020 is estimated at 3.76 million, down 62% (y/y).
Foreign Direct Investment (FDI) flows into Vietnam strengthened in July compared to May and June. However, overall FDI commitments declined by 7% (y/y) during the first 7 months of 2020 compared to the same period of 2019. The surge observed since end April capture the stronger interest of foreign investors in Vietnam, which, by being ahead of the COVID-19 curve and being located next to China, may take advantage of the revamping of global value chains and the ongoing effort by multinational to diversity their risks.

DIEP NGUYEN