Vietnam’s economy in 2020 is predicted with not much pressure as by and large it has met the country’s 5-year plan of 2016-2020 for GDP growth. In fact, Vietnam’s GDP can hit the average growth target at lower end of 6.5-7% by only increase extra 5.4% in 2020.


However, all of the sudden the Covid-19 pandemic in the first quarter of 2020 is the game-changer, making the global economic bleak, and recession risk is quite clear for many major economies. This pandemic affects not only supply side (as it creates a global supply chain disruption), but also demand side (when travel restriction and social distancing are imposed), as result, it hits Vietnam from the both ends, creates significant pressure since we are strongly dependent on external markets for both inputs and outputs.


At the moment, the government has not yet revised down the 2020 growth target but estimates from the Ministry of Planning and Investment showed that growth might be at least 0.8% lower than the initial target (to 5.96-6.25%). However, with extremely negative impact to the economy, trade, consumption and the unprecedented recession risk SSI believes that even the GDP growth range of 5-6% YoY for 2020 is very positive for Vietnam. 



For 2020, when several major growth drivers facing trouble (such as manufacturing, export, service, especially tourism or consumption…), Vietnamese Government might have to accelerate public investment for infrastructure (by switching public-private partnership projects into public investment) to support growth. Other stimulus packages (both monetary and fiscal) might be introduced, after the Covid-19 pandemic has been contained. 


In details, for monetary policy, interest rate cut and preferential credit package has been in place to support the impacted enterprises, even if inflation might be high in the first half of the year. However, inflation pressure might be easing, when pork price rally will be tamed, not to say the lower commodities price. Exchange rate could have more volatility, as the USD rally might stay on in the flight to safety. However, high forex reserves, maintained trade surplus and capital inflows will limit the impact on USD/VND exchange rate. Foreign investment into Vietnam continues to be stable.


On fiscal side, public investment is the only viable option for boosting growth, especially in the final year of the 5-year plan 2016-2020. State-owned enterprise (SOE) reforms might show no significant result, with no sizeable IPO/divestments.


On risk, beside the negative impacts of Covid-19 pandemic may be prolonged, any further signs of real estate market troubles would be another blow to the economy. Anyway, we do hope that hurdles in real estate market would be resolved significantly in 2020 to attract more private investment.




In 2020, among several catalysts for the market, new local ETFs can be one of the cornerstone elements to attract inflows into the Vietnam market, of which there are outstanding  SSIAM VNFIN LEAD ETF of SSIAM was recently listed as of 18th March 2020 and the VFM Diamond ETF has been approved by the SSC.  Meanwhile, the prospect of other ETFs splashing onto the market could also being introduced in the coming time.

In terms of regulation, several new important laws and regulations get approved in 2020. Among the list, SSI expects the Enterprise Law and Investment Law to provide new guidelines for foreign ownership limits (which might legalize the Non-Voting Depositary Receipt (NVDR) trading mechanism). Another key piece of legislation is Decree 32 on SOE divestment, which will streamline the incentivization towards divestment (at least in small-sized SOEs).


In terms of new supply for the market in 2020, SOE divestment might make new strides ahead. However, actual IPO activity might see another quiet year, as it takes time for large SOEs to complete valuation process. Given the above information, it is likely that the Vietnamese market is not expected to upgrade to emerging market status until 2022.


The COVID-19 pandemic has been sweeping the world in the first quarter of 2020 and made significantly adverse effects on prospects of profit growth of business as well as macroeconomic growth. Although it is not easy to estimate the magnitude of decrease in corporate earnings growth, it is obvious that sectors such as transportation, oil & gas, tourism, and out-of-home consumption will be hit immediately. Meanwhile, some other sectors will be impacted later on as the virus spreads its effects up and down the value chain. Lagging indicators will come later from the impact of stagnant production, strained supply chains, lower disposable income overall. To deal with this, supportive policies by the Vietnamese government as well as many other countries are duly expected. Accommodative monetary and fiscal policies introduced by the government such as interest rate cuts, tax payment extension for impacted enterprises, delayed payments for social insurance obligations, and accelerating public investment disbursements to build value-added infrastructure projects are all part of the solution.


In short term, due to the Covid-19 pandemic, 2020 will be the year that both macroeconomic and corporate earnings will be abruptly hit by this invisible antagonist. Enterprises under research scope of SSI Investment Analysis and Consulting Department are estimated no profit growth in 2020, marking a large pullback from the growth rate of 18.6% in 2019. If excluding banking sector, earning growth is estimated at -9.4%, with a sharp decline caused by airlines, aviation, oi l& gas, industrials, etc. In contrast to the generally annual pattern of strong inflows in observed in the 1st quarter, a huge amount of capital has been rapidly withdrawn from the equity market in Feb and Mar 2020, amounting to a staggering $350 million USD as of the end of March. The VN-Index dropped -31% YTD price point on 23rd Mar 2020, falling to as low as 666.6 points, the lowest level since Dec 2016.


Looking over the long term, it is likely that all new regulations designed to fulfill the needs of the market will be in ready in the second half of 2021, which will positively impact the psychology of domestic investors and help boost sentiment of the Vietnamese stock market as a whole. Given the bottlenecks present in some key areas such as public investment in infrastructure, the privatization process, or stock market structure, Vietnam needs to apply a sense of urgency to clear these roadblocks in order to maximize growth momentum and efficiency within the period of the golden demographic window, a race to achieve a certain and defined vision for the economy before the population starts to age quickly in 7-10 years from now.