Covid 19 – Economical Impact on the UK and Vietnam

An article by Lincoln International Business School academics detailing the effects of the impact of Covid 19 on the economies of the UK and Vietnam has recently been published. This article by Hao Quach and David Gray marks the first publication of the newly formed Vietnam/United Kingdom Policy and Economic Research Group within LIBS and can be located here:- https://saigondautu.com.vn/investment-finance/a-look-from-vietnam-and-britain-78277.html

In these unprecedented times, with both production and consumption affected, known business models have had to be turned on their head with innovative, and in cases drastic stimulus packages implemented to prop-up economies.In late March, with the shift from social distancing to effective lock down, any UK retailers selling ‘non-essential goods’ were forced to close, joining the restaurants, pubs and cinemas already sitting silent. On the 19th March, the Bank of England reduced the interest rate again to just 0.1%, and, faced with the risk of high unemployment and the failure of many businesses, the Chancellor of the Exchequer announced £330 billion of loan guarantees and a further £20bn in tax cuts and grants. The UK government went on to promise to pay 80% of private sector wages up to £2,500 a month and a rates ‘holiday’ for many businesses.

In contrast, Vietnam has been considered more successful in containing the virus utilising a low cost model; however, with an open economy increasingly reliant on imports and exports, the pandemic is likely to impact as significantly and negatively as the UK. Actions by the Vietnamese government closely resemble steps taken by Westminster, utilising some textbook fiscal and monetary policy initiatives. They too have lowered the interest rates with the expectation that this will assist firms to have more access to supportive loans. Here though the similarity ends, with Vietnam opting for credit packages to be distributed via commercial banks, where an inconsistent policy amongst these banks could lead to an over-investment risk in the future for many firms. In addition, as with other countries around the world, there is a risk of high unemployment, however, as yet, a credit package that would support wages is yet to materialise.