Vietnam Factory 'Shutdown' to Continue Until Next Year

Economic Recovery Slower Than Expected
Supply Chain Disruptions Likely to Persist for a While

On July 9th (local time), the highways in Ho Chi Minh City, the largest city in Vietnam, were empty due to COVID-19 quarantine measures. At that time, the authorities implemented strengthened quarantine rules prohibiting residents from going out except in unavoidable cases for 15 days. [Image source=Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] There is a forecast that the shutdown of factories in Vietnam due to the spread of COVID-19 will continue until next year. The prolonged shutdown in Vietnam, known as the "Second Factory of the World," is expected to cause ongoing supply chain disruptions for the time being.

According to the US economic media CNBC on the 15th (local time), Bank of America (BofA) Securities told its clients last weekend that "Vietnam's economic recovery will proceed more slowly than expected," predicting this outlook.

Vietnam hosts numerous production factories of major global apparel companies such as Nike, Adidas, Ralph Lauren, Zara, and The North Face. However, due to the government's strict lockdown measures implemented amid the spread of the Delta variant virus in July and August, many factories closed one after another.

BofA Securities cited as reasons for the prolonged negative impact from Vietnam that the southern region, where factories are concentrated, is reopening its economy more slowly than the northern region, and that Vietnam's COVID-19 vaccination rate is significantly lower than other countries. Vietnam's full vaccination rate is 35.6%, which falls short of the global average of 41.2%.

The very strict quarantine measures related to factories are also a factor hindering economic reopening. In fact, since July, workers who were blocked from entering due to city lockdowns and movement restrictions had to leave their workplaces en masse and have not yet returned.

Mohamed Faiz Naguta, a researcher at BofA Securities, pointed out, "The Vietnamese government's stringent quarantine measures are preventing workers from returning to factories."

BofA Securities warned that global companies have an overly optimistic view regarding the timing of Vietnam's economic reopening. Researcher Naguta said, "It will take up to six months for production activities in Vietnam to normalize," and projected that the shutdown could end as early as next year.

This content was produced with the assistance of AI translation services.