Not all economies have been created equal, which is why some have been more adversely affected by Covid-19 than others. Certainly developing and emerging economies such as Vietnam stand to suffer considerably as a result of the Covid-19 pandemic, although the national government is, fortunately, considering steps to help mitigate this significant impact.
For example, the Vietnamese central bank is looking to help businesses that may be struggling as a result of stringent social distancing measures, by slashing the base interest rate as of May 13th and reducing the existing refinancing rate on loans from 5% to 4.5%.
In addition to these fiscal stimulus measures, the Ministry of Finance has pledged to establish a research group, which would be tasked with studying and proposing policies to manage virtual assets and crypto funds. Of course, this is more of a long-term economic strategy, but could it prove beneficial to the future health of the nation?
A Look at Economic Sentiment and the Vietnamese Dong
In truth, Vietnam has been embarked on an economic slump since the beginning of 2020, after achieving stellar growth of 7.02% during 2019 (the second-highest level of growth since 2007).
The region’s growth forecast has been slashed to just 2.7% for 2020, although the Vietnamese authorities maintain a positive outlook that will look to drive expansion in the region of 5% over the course of the coming months.
Of course, the nation’s currency has also embarked on a slump in 2020 so far, due largely to issues of demand and the impact of quantitative easing and reduced interest rates. So, after a relatively stable and prosperous 2020, the Vietnamese dong has fallen against the U.S. Dollar and is set to face even more pressure throughout the remainder of the year.
Of course, this has a dramatic impact on foreign investment and capital inflows, with platforms such as Tickmill showcasing dwindling valuations for both the short and medium-term.
This, combined with an estimated trade deficit of around 3% of export turnover this year, leaves the Vietnamese economy precariously placed at a time when its core businesses and households need significant financial support.
How Will the New Research Group Boost Future Economic Prospects?
In addition to rolling out real-time stimulus measures (that are ironically lowering the value of the Vietnamese Dong), the authorities in Vietnam are also considering their policy approach to the management of virtual assets and cryptocurrencies.
The research group set to review this includes nine members, led by Vice Chairman of the State Securities Commission Pham Hong Son. Various other economic and political departments are also represented within the group, which hopes to identify potential risks with virtual asset trading and develop stringent regulations that help the government to leverage the full potential of forex and cryptocurrency tokens.
Of course, this represents the next step in establishing Vietnam as a viable cryptocurrency hub, and it’s fair that the nation has a small window of opportunity to achieve this objective (with Hong Kong having recently approved it’s very first cryptocurrency fund to emerge as a market leader in Asia).
It was back in 2017 that the Vietnam government issued a decision to approve a project dictating a workable legal framework for managing virtual assets, while a similar process was followed for Bitcoin and similar tokens the following years.
So, the groundwork has already been laid, but Vietnam must be proactive if it’s to take the final plunge and create a viable (and most importantly competitive) market for digital assets and cryptocurrency.
This will not only boost the country’s medium and long-term economic outlook at a time when they need it the most, but it will also help Vietnam to become an early player in a rapidly growing marketplace.