This report documents and explores the early economic impacts of COVID-19 on households and businesses in Vietnam from June 2020 to March 2021. Using new survey data, microsimulation techniques, and administrative data, this report looks in each chapter at (1) the impact of the crisis on households and businesses, (2) how they coped, (3) how the government responded, (4) how the trajectory to poverty was affected in 2020, and (5) potential longer-term consequences, particularly consequences related to increasing inequality.

The period covered by the report marks the first phase of the pandemic in Vietnam, a period when COVID-19 was successfully controlled, and before the large outbreak in April 2021 caused by the Delta variant. Although COVID-19 cases in Vietnam were among the lowest in the world throughout 2020 and early 2021, households still experienced lower incomes, job loss, and hardships. Inequalities, differences in abilities to cope, vulnerabilities, and policy implementation challenges found during this early phase are cautionary signs and offer relevant lessons to consider as Vietnam faces a much more challenging phase of COVID-19 ahead.

Chapter 1. Vietnam’s Early COVID-19 Context

COVID-19 erupted onto the world stage in early 2020, and Vietnam responded swiftly. Vietnam’s early health response helped it perform remarkably well economically compared to other countries in 2020. The outbreak in April 2021 adds uncertainty to the full extent of COVID-19’s impacts on households and firms.

Chapter 2. Impacts on Households and Businesses: A Year Deferred

COVID-19 halted a period of rapid income and wage growth for workers and households in Vietnam. Over a year after the onset of COVID-19, households and firms are still on the path to recovery.

Chapter 3. Coping: A Reliance on Self-Insurance and Personal Networks

During COVID-19, households in Vietnam primarily relied on self-coping strategies through reducing consumption and support from personal networks.

Chapter 4. Policies: A Call to Strengthen amid Heightening Risks

Arguably no country in the world proactively managed challenges in 2020 better than Vietnam, but heightening risks from COVID-19 in 2021 call for stronger actions. Vietnam took early action to contain COVID-19 and managed health risks remarkably well, but it is now behind on vaccinations amid rising cases. The government passed policies in early 2020 to provide relief to affected households, and it can learn from the experience if future relief packages are implemented. Relief options for formal firms were different but faced similar implementation challenges.

Chapter 5. Impact on Poverty in 2020: Progress Slowed Down but did not Reverse

Despite relatively good macroeconomic outcomes in a COVID-19 context, adverse impacts from the pandemic still permeated into daily lives and slowed the trajectory of poverty reduction.

Chapter 6. Longer-Term Impacts: will COVID-19 Lead to Widening Inequality?

Even as most households adapted throughout the pandemic, goals and ambitions may have been deferred; and those with more means were able to adapt better. Consequently, existing disparities have widened and, left unchecked, will likely lead to widening inequality and slower growth in the long term. The impact from inequality on poverty reduction can be just as large or larger than historical growth impacts.

Chapter 7. Policy Recommendations

There is an opportunity to learn from early experiences to improve policy responses not only for the remainder of the COVID-19 (coronavirus) crisis but also to better guard against future shocks.

Fortunately, before the fourth wave, the impacts from COVID-19 in Vietnam were mild relative to the rest of the world. Yet, experiences from the early waves of COVID-19 still highlighted existing inequities and revealed policy implementation challenges. The differential experiences between different groups of households and firms illustrate their preexisting vulnerabilities and the different capabilities in coping between groups.

Observing how households and firms were affected, even if by mild shocks; how they adapted; who received assistance; and who could not cope well offers information on existing gaps in access to services, the importance of building resilience, and the need for better safety nets to guard against poverty traps and business closures.

There are lessons both for the short term—how to improve the household and firm response for the much more severe fourth wave—and for the long term—how to improve the broader social safety net for times of crisis and times of normalcy.