COVID-19 Pandemic - a fierce battle between humankind and mother nature
In light of the burgeoning outbreak of the coronavirus Covid-19 around the world and the fact that the World Health Organization (WHO) has rung the alarm and announced this outbreak a global pandemic, what do experts have to comment about this event, especially with regards to Vietnam economy and the world as a whole? Writer Nguyen Truong had sat down and had an interview with Dr. Truong Van Phuoc, former Chairman of the National Financial Supervisory Committee, member of the Prime Minister's Economic Advisory Group, about the consequences that doomed the global economy after the biggest medical crisis the world ever had to encounter.
What will be the fate of humankind before the wrath of mother nature?
According to Dr. Truong Van Phuoc, the war that humanity is waging against the coronavirus, if put in juxtaposition, can be considered as a battle where humans must overcome the relentless nature. Our planet earth is facing a serious challenge, which is caused by a novel virus, now commonly known as Covid-19. As of March 19, 2020, hundreds of thousands of people were infected, and the number of casualties is remarkably hiking up to nearly ten thousand cases.
The history of the birth and evolution of mankind, according to many anthropological theories, has spanned several million years. Certainly, in such a long and profound process, mankind has had to fight countless of unending battles against atrocious natural factors to exclude them from standing on the verge of extinction. Even when humanity has advanced to a civilized era of the 21st century, where the presence of Industrial Revolution 4.0, Artificial Intelligence, Internet of Things, and many other achievements seem to affirm the thought that humankind has secured its hegemony over nature and become the governor of literally everything, the coronavirus pandemic now emerges and has us all sit down and rethink. The outbreak has marked its territory in nearly eighty percent of the Earth’s surface, and we have yet to find the vaccine for prevention.
No matter what happens, the pandemic will come to an end, and mankind will continue on the path that their ancestors underwent millions of years ago to make the earth a worthy place to live, not a place from which people fled.
"The question to ask is, after the pandemic is over, what are the lessons that humanity needs to learn? The lessons of state-level governance or the transnational issues that lay responsibility on institutions like the World Health Organization (WHO), for example. It seems that people until now still go after what nature, with all of its mysteries, is always ahead. ", Dr. Truong Van Phuoc said.
Adding a “fatal blow” to the world economy
It is worth talking about the Chinese economy first and foremost, not only because it is the country where the virus first broke out, but also because China is the second-largest economy in the world, and one of the most important strategic nodes of the global supply chain. When the epidemic broke out, most factories in China had to put up the shutters, which in turn disrupts the global supply chain. Many multinational companies that outsource parts or all of their production chains in China such as Hyundai of South Korea, BMW of Germany, Apple of America have to suspend part of the production due to the lack of components and semi-finished products supplied from the supply chain in China. The latest forecasts last week showed that China's gross domestic product (GDP) growth rate this year will fall drastically to 4.9%, even worse, 4.5% compared to the early 2020 forecast of 5.7%.
The most important pillar for global economic growth is the US economy, which has the largest GDP in the world of about 22 trillion US dollars. The economy of the country also suffered a lot of losses because all states have so far registered the existence of infected people with a total number of nearly 3,800, the death toll of over 70. Schools in the US were also closed until at least early April. The US Centers for Disease Control and Prevention (CDC) recommends that people do not participate in gatherings of more than 50 people. The United States has also shut down flights to European countries.
Besides, there have been more than 160 countries with confirmed cases of infection. In the wake of these events, many economic activities have been stalled or interrupted, and the cancellation of international flights continues to increase. Many entertainments, tourism, and recreational activities, which were once the mainstay of foreign spending attraction in many countries, now have to witness the scene of closure. Global gasoline prices have dropped by more than 50% by mid-March 2020, reflecting a sudden drop in demand as the world's production has largely come to a halt. As a result, many latest forecasts show that the world economy this year will increase by 2.4%, not achieving the initial forecast of 2.9%.
Vietnam and the post-crisis economy scenario
With respect to Vietnam, who shares an inland border of nearly 1400 km long with China, the impact of the coronavirus from Wuhan of China has been witnessed as early as January 2020, a few weeks before the Vietnamese traditional Lunar New Year. The impact gradually penetrated to Vietnam and exhibited its glaring in many aspects, firstly in the trading of agricultural products in many border provinces. During February and March 2020, this effect was rapidly increasing as the forecasts of a cessation of outbreaks in China are not taking place properly but are showing a severe tendency of acceleration. Not only Vietnam was taking its grave toll on the economy since a large amount of raw materials for production plants in Vietnam was imported from China, but many countries around the world who have established long-time trade relations with China also had to bear the brunt of the shutdown of trades and borders.
Vietnam has successfully contained phase 1 in the plan to cope with COVID-19 with 16 cases completely cured. But when the virus outstrips current containment to become a pandemic, the possibility of infection is very high. The flight from the UK to Vietnam on March 2nd brought Vietnam into the second phase of the battle against the epidemic, now the number of infected cases has reached 57. There are many predictions that Vietnam's GDP may decrease by 0.4% compared to that in normal conditions. Of course, this prediction greatly depends on when the world is in absolute control of the virus, and when Vietnam declared a radical containment of the infection.
Whether this desire will be realized in the middle of the year or get stalled until the end of the year depends on the coping methods and determination of the governments of countries involved in the epidemic. Regardless of the scenario, Vietnam's economy has been receiving a fatal blow. Firstly, it is because of the close proximity in terms of geographical location and many important multifaceted bilateral economic and trade relations between the two countries. On the other hand, Vietnam's economy has been deeply integrated and with the fact that over 160 countries have been caught up in a whirlwind of pandemic infection, Vietnam is experiencing a dire slump in its economy resulted from the interdependence among the nations.
But let’s look back on the history of Vietnam. It is always in the most severe moments in history comes the unparalleled resilience of the Vietnamese people. Recall the collapse of socialism in the Soviet Union and Eastern European countries in the early 90s of the last century, with the Soviet Union dissolved in late 1991. At that time, the economy of Vietnam was hanging by a thread when support from fellow communist countries could no longer continue. By the indomitable will of the entire nation, we have stepped up to accelerate the innovation process started in 1986, to bring the country to transcend through many difficulties and challenges, to develop a prosperous Vietnam like today. At this point, our strength is that we are determined, without hesitation, to look directly at the inherent deficiencies of the economy to carry out the process that we have so far called "restructuring." That is what we call “in great danger will arise great opportunities”.
Different types of businesses of Vietnam, including individuals doing business in all industries and fields, face difficulties and damages. Consumption of products has slowed down, the service sector has shrunk in scale, tourism activities suffered heavy losses, import and export of the economy are likely to be greatly reduced ... These difficulties will be making businesses and vendors reduce revenue and thus profits, weakening the ability to repay loans, and lowering taxation and duty flow into the government budget.
What action should be taken to minimize "casualties" in the battle between men and nature?
Protecting the health and safety of people in this pandemic is the ultimate requirement of every request and policy. Positive outcomes in this fight against the epidemic will be an endless source of inspiration for our people, the business community, and the state apparatus. Unlike stage 1, where the source of infection is from East Asian countries, in this stage 2 against Covid-19, the main source of infection is supposedly from Europe. The decision of the Government to suspend entry for foreigners coming from or having gone through European countries within 14 days before the expected date of Vietnam is a timely and correct counter.
Implementing the isolation policy towards those having relations or in contact with the infected person has been carried out very resolutely and strongly. The regulations on universal health reporting that have been implemented nationwide so far will give state-owned health management agencies more information needed to handle epidemic prevention and provide timely solutions.
Regarding economic, financial, and monetary policies, many countries around the world have recently adopted new policies to contain the negative impact and facilitate the economic rebound. They use fiscal policies such as subsidies, tax deferral, tax reduction, etc, to mitigate burdens and accommodate those suffering losses. They also use strong monetary policies such as interest rate cuts, increasing market liquidity, and cut back on reserve ratio requirements. The seven largest central banks in the world have agreed to facilitate the exchange of the US dollar to provide capital to the global capital market if the financial market faces a shortage of money due to COVID-19.
In Vietnam, on March 4, the Prime Minister issued Directive 11 / CT-TTg focusing on urgent solutions to remove difficulties for production and business, ensuring social security to cope with the COVID-19 pandemic. Especially in this directive, there is a credit support package of about VND 250 trillion provided exclusively for commercial banks so that they can meet the demand of capital to continue production and business operation, restructure debts, reduce loan interest promptly. There are also support packages of around VND 30 trillion from the government budget to solve problems related to tax, duty, and fee exemptions, remove difficulties for the affected citizens and businesses. Those are immediate solutions to buffer against the negative impacts that the epidemic has on the economy. After the epidemic ends, the Government will take appropriate measures to compensate for the damage caused by the epidemic, regain growth momentum, ensure macroeconomic stability, and make the best effort to complete its socio-economic targets in 2020.
Dr. Truong Van Phuoc
Tiến sĩ Trương Văn Phước, nguyên Quyền Chủ tịch Ủy ban Giám sát tài chính Quốc gia, thành viên tổ Tư vấn kinh tế của Thủ tướng.
"Lúc này đây, sức mạnh của chúng ta là không né tránh, không chần chừ do dự, dám nhìn thẳng vào những khuyết tật cố hữu của nền kinh tế để thực hiện quá trình mà bấy lâu nay ta gọi là "tái cơ cấu". Nói trong nguy nan sẽ nảy sinh cơ hội là như thế."