HSBC has just released the report “Vietnam At A Glance November 2021 – The tourism industry has begun to “defrost” with the assessment that although Vietnam’s tourism plan is not really as ambitious as neighboring countries. In the region, fully vaccinated travelers strongly support the decision to reopen five tourist destinations without requiring quarantine in November.
Although Vietnam’s initial opening-up is still quite conservative and cautious, it also has a significant impact on the economy, especially the labor market is struggling and the current account surplus is shrinking.
According to HSBC, the successful recovery of the tourism industry depends on many factors. First, the low national vaccination rate and the continuing COVID-19 situation may create apprehension. The absence of Chinese tourists, which once accounted for a third of all arrivals to Vietnam, also suggests that growth soon may not be the case. Finally, in terms of practical implementation, more efforts are needed to resume international flights.
It is encouraging that Vietnam is making much progress in preparing to welcome back tourists, according to HSBC.
Slow recovery
HSBC recalls the bright days before the pandemic when traveling was easy when just hop on a flight and didn’t have to worry about quarantine, Vietnam’s tourism industry has grown tremendously in recent years thanks to its efforts. openness in the government’s visa policy.
The number of tourists to Vietnam has increased to a record of over 18 million in 2019, bringing in a revenue of 33 billion USD, equivalent to 12.5% of GDP.
Nearly 80% of tourists come from Asia, of which the two major markets, China and Korea, account for 56%. Specifically, Chinese tourists alone accounted for the largest proportion, equivalent to one-third of the total number of visitors to Vietnam, equivalent to Thailand and far ahead of neighboring countries in the region, which was only 15-20. %.
As the industry that “takes the lead” during the COVID-19 pandemic, tourism has almost completely stopped. Masteri thao dien for rent only welcomes 3.8 million visitors in 2020 and the total number of visitors until now in 2021 is less than 1% of 2019. Source: CEIC, HSBC; NB: arrivals as of now in 2021: Philippines as of May, Malaysia as of June, Indonesia as of August, Thailand, Singapore and Vietnam as of September.
Due to the absence of international visitors, related services, especially accommodation, transportation and catering, have not been able to recover properly. Domestic tourism has suffered more or less during the periods when Vietnam has well controlled the spread of the disease, but it was also suddenly interrupted when the Delta strain outbreak appeared at the end of the second quarter. and eating and drinking in the third quarter decreased by more than 50% compared to the same period last year, showing the serious impact of prolonged periods of isolation.
It’s not surprising that the labor market is in turmoil. About 10% of Vietnam’s workforce is concentrated in accommodation, transportation and entertainment services, all of which are closely related to tourism.
According to HSBC, this data actually does not reflect the real picture because there are activities that are not official statistics, but account for a large proportion of the labor market in Vietnam, of which most are related services. related to tourism. When the tourism industry came to a standstill, about 60% of workers lost their jobs in 2020, 90% were out of work as of May 2021.
Although there are no detailed statistics on the impact on the tourism industry, data from the General Statistics Office of Vietnam shows that more than 2 million workers in the service industry fell into unemployment in the third quarter, their income was reduced. down 15% from the previous quarter.
Since March 2020, Vietnam has closed most of its borders, only considering entry for repatriated Vietnamese citizens, people entering for diplomatic purposes, foreign investors and experts with specific isolation requirements. body. Since the third quarter, Vietnam has begun to relax border restrictions when the number of new cases per day becomes stable, but is still quite cautious so it has not opened massively.
Since August, Vietnam has halved the requirement for a concentrated quarantine period from 14 to 7 days for fully vaccinated arrivals.
However, Vietnam did not follow Thailand’s route of opening the entire country to 63 low-risk countries from 1.11. On the contrary, Vietnam will only open 5 tourist attractions: Phu Quoc island, Da Nang, Quang Nam (where Hoi An ancient town is located), Khanh Hoa (with the coastal city of Nha Trang) and Quang Ninh (with the coastal city of Nha Trang). Ha Long Bay) from November. This is part of a plan to revive the tourism industry. In particular, Phu Quoc island was selected as a pilot place, which will open from November 20 to welcome fully vaccinated tourists through charter flights.
In phase 2, visitors will be free to travel in these 5 localities from January 1, 2022, meaning that phase 1 will only be open to serve within a limited range and locations. The final stage will be to fully reopen tourism, however, the authorities have rejected information about the time of full reopening from June 2022, citing the need to carefully monitor the progress of vaccination as well as the progress of the vaccine. assess the situation of disease control.
Although Vietnam is gradually moving towards the goal of reopening, showing encouraging signs, however, many unpredictable situations often occur during the epidemic period, and to successfully revive the tourism industry depends on Many factors, according to HSBC.
HSBC said that the first factor to consider is the entry requirements. This means that it is not only necessary to consider easing border restrictions on the Vietnamese side, but the border controls of other countries are equally important. For example, the absence of Chinese tourists to Vietnam suggests that short-term growth expectations will remain limited as mainland China still tightens border control measures with a 14-day quarantine requirement at guests. hotel, plus a few days of self-isolation/home health monitoring depending on the locality.
Besides the increased infection, HSBC said that Vietnam’s low vaccination rate is also a problem. Vietnam has only achieved the national vaccine coverage rate of 22%, still quite slow compared to neighboring countries in the region. In fact, Vietnam has accelerated the vaccination schedule since the third quarter, prioritizing tourist destinations and industrial clusters. All tourist destinations, except Quang Nam and Da Nang, have vaccinated at least 80% of people. However, HSBC said that Vietnam needs to carefully calculate the plan to support travel between these localities as well as across the country while still having to limit potential risks from the virus.
In addition, HSBC also recommended that Vietnam also make efforts to resume international flights to promote tourism. Since the beginning of the epidemic season, many flights have been canceled and even with the recent distancing regulations gradually removed, it will still take a while for the aviation industry to regain its pre-pandemic form. However, in the misfortune, there is still a good fortune that Vietnam has quickly accepted the “vaccination certificates” of 72 countries and developed new routes to attract new tourists. From November, Vietnam Airlines will start operating regular non-stop commercial flights to the US, while Bamboo Airways will operate direct flights to the UK from January 2022. The Ministry of Transport is also planning to reopen international routes.
Ready for the new normal?
After four months of local isolation, which is considered a trading hub, Vietnam finally decided to reopen its economy from 1.10. People’s mobility increased significantly from 66% to 33% below pre-pandemic levels at the end of October, facilitating a recovery in domestic demand.
Although the retail sales index fell 28% in October compared with the same period last year, that was mainly due to the rather high results last year. The chart below shows the retail sales index was 88% compared with January 2019, a big step up from 74% in September. However, the recovery has mainly been in the goods sales segment driven by the services sector. restrictions such as on-site dining, entertainment and travel restrictions.
Although price pressure is gone, one issue to watch out for is rising fuel prices. Specifically, transportation costs increased rapidly by 2.5% month-on-month, playing a key role in creating inflation. Consumer price index in October decreased by 0.2% month-on-month, leading to only 1.8% increase over the same period last year. This is a surprising indicator to the market, according to HSBC, (HSBC forecasts 2.2%; Bbg forecasts 2.5%) with deep roots mainly due to the reduced price pressures that fluctuate according to demand. down, which is also a sign of slow economic recovery.
Despite this, HSBC still believes that a gradual but slow recovery in domestic demand will still be able to make up for the high fuel prices, at the same time, HSBC expects inflation to only increase to 2.1% in 2021. When the economy returns to normal, domestic demand is likely to push inflation to 3.5% in 2022.
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