Russia’s attack on Ukraine will have certain impacts on Vietnam’s economic growth prospects in 2022.
How does the tension in Ukraine affect Vietnam’s economy?
Regarding the issue of the global economy and how Vietnam’s economy will be affected by the tense situation in Ukraine, sharing with readers, Mr. Nguyen The Minh, Analytical Director of Retail Banking, Securities Company Yuanta Vietnam emphasized that geopolitical conflicts will eventually turn to trade wars.
The first negative impact will affect the psychology of investors in the stock market. In recent trading sessions, the market fluctuated very strongly, not only in Vietnam but also in most other markets.
Movements of market indexes on February 24. (Source: VNDirect).
- The second negative effect is the war can increase inflation..
The factor that immediately affects the economy is trade activities between the economies of the US, EU and Russia, such as export activities between these national zone. In fact, Russia’s current supply to the EU is largely related to oil and gas. If in the event of a trade conflict, the EU will no longer import Russian oil and gas, which will push up oil demand in the euro area, causing oil prices to rise. When the price of oil increases, it will push up the inflation of the whole economy, not only in Vietnam but also in the world. Thus, inflation pressure in Vietnam will increase in the coming time. This will affect monetary strategies and policies in the context of businesses recovering from the COVID-19 wave.
Besides the negative effects, Mr. Minh also mentioned the positive effects, the wave of FDI displacement.
Which industries benefit, which industries face difficulties?
Vietnam’s export outlook in 2022 may be affected. (Artwork: VNA).
Regarding the industry that has a direct positive impact, is the oil and gas industry. In the past time, when the price of oil increases, it will promote the restoration of oil production, so that enterprises operating in the field of oil and gas trading, or oil and gas production will benefit.
However, when gasoline prices increase, logistics costs will also increase, textile and seafood enterprises will suffer many impacts, leading to the export situation of enterprises being affected, increasing logistics costs. Profit margins of businesses will be affected. High oil prices can cause materials such as iron and steel to increase as well. In the scenario where the world economic growth slows down, Vietnam’s import and export may become difficult. These things cause Vietnam’s economic growth to slow down.”
In addition, production and investment activities in the world are also affected because when there is stress, investment risks will increase significantly, the amount of money pouring into countries at risk will decrease. This also affects the ability to attract foreign direct investment (FDI) into Vietnam.
Author: MBA. Võ Hữu Sang
