Nine sectors that will be negatively affected by the coronavirus epidemic
Vietnam declares novel coronavirus epidemic | |
Da Nang Customs actively prevents and combats coronavirus epidemic |
The disruption from important suppliers such as China may be a challenge for Vietnam's economic growth. Photo: Thu Hoa |
Accordingly, the coronavirus epidemic is spreading much faster than the previous SARS (2002-2003). By the morning of February 3, there were eight confirmed cases of coronavirus in Vietnam.
Economically, Vietnam has stepped up its international trade connectivity in recent years, with the total value of exports and imports/GDP accounting for a high proportion (196.6%). Therefore, any disruption from important suppliers such as China could be a challenge for Vietnam's economic growth.
In fact, Vietnam has closed a number of border gates to China until February 8, 2020, which means restricting trade between China and Vietnam to a certain extent. In addition, Vietnam has implemented visa restrictions for guests from areas in China seriously affected by the coronavirus. Exports of agricultural products and tourism will be adversely affected by the above-mentioned events, at least in the short term. Therefore, SSI forecasts that GDP in Q1 will face many challenges. The government may need support factors to help the growth recover in the second half of this year, in order to achieve the GDP growth target of 6.8% for the whole of 2020.
Accordingly, SSI predicts that nine industries will be affected by coronavirus: textiles, retail, seafood, beer, oil and gas, securities, maritime - shipping, airport services and aviation.
In particular, although there is no direct impact on the demand for garment products, as most domestic garment companies do not export to China, China's slowdown in GDP may have a long-term negativeimpact on consumption. Besides, the production and business activities of Vietnamese textile enterprises will be negatively affected as many textile factories in China close in January and February. Currently, China is the biggest supplier of raw materials to Vietnam.
For the retail industry, SSI believes that the number of shoppers in stores will be reduced due to limited consumer access to public places to avoid the possibility of coronavirus infection. Meanwhile, consumption will shift towards essential health protection products (pharmaceuticals) instead of items like information technology and communications. However, experts also note that consumption habits may shift from traditional trade (traditional markets) to modern trade and online shopping to ensure hygiene and safety.
Beer consumption will also be heavily influenced by the coronavirus, as consumers avoid going to public places, reducing congestion and outside spending. The beer industry this year is also negatively affected by Decree 100 related to limiting the harmful effects of alcohol, effective from January 1.
Seafood exports to China are also expected to decline as external consumption trends may be directly affected by the coronavirus. In 2019, the Chinese market accounted for 16.5% of Vietnam's total seafood export value, accounting for 16.1% of shrimp exports and 33% of pangasius exports. Besides, the prolonged Lunar New Year holidays may affect export revenue in the first quarter of 2020.
For the oil and gas industry, the price of Brent oil ending January 30, 2020 decreased by 16% from the temporary peak formed in early January 2020. The fall in oil prices was attributed to investor concerns about weakening oil demand in China, where the economy is and will be affected by the coronavirus.
Also, because consumption in China may be negatively affected in the short term due to concerns about virus outbreaks, export activities to China will be adversely affected in Q1/2020. This will negatively affect the volume of goods transported through seaports in Vietnam. Meanwhile, e-commerce and courier demand are expected to increase sharply as people limit going out in the near future.
All airlines may be negatively affected by the coronavirus, as travel demand may decline, especially travel activities involving China. Along with that, airport services related to cargo and passengers will be affected. Passengers from China accounted for about 40% of Vietnam's total passengers in 2019 and this number will plummet in the short term. Freight activities related to China will also be reduced due to lower demand from Chinese consumers and limited production.
The coronavirus also has a negative impact on the market sentiment in the short term, thus having a negative impact on the securities industry. But if the disease is controlled, the market will immediately recover strongly, as has happened in the past. Therefore, SSI maintains a neutral view of the securities industry throughout 2020.
Meanwhile, SSI assessed that there are four industries that could benefit from the coronavirus epidemic: pharmaceuticals, information technology, electricity and water.
Meanwhile, the following 10 industries were rated neutral, including cars, dairy, housing real estate, industrial park real estate, banking, insurance, construction, steel, cement and fertilizer.
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