Unpacking Impact of COVID-19 on Vietnamese Firms: Evidence from a Novel Survey

UnpackingImpactofCOVID-19on VietnameseFirms: EvidencefromaNovelSurvey EraDabla-Norris,AnhThiNgocNguyen,YuanyanSophiaZhang,ThuyDinhPham,NgaHuongPhi,DuongThuyNguyen,andTuanDanhDuong IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2022 SEP ©2022InternationalMonetaryFundWP/22/201 IMFWorkingPaper AsiaandthePacificDepartment UnpackingImpactofCOVID-19onVietnameseFirms:EvidencefromaNovelSurveyPreparedbyEraDabla-Norris,AnhThiNgocNguyen,YuanyanSophiaZhang,1ThuyDinhPham,NgaHuongPhi,DuongThuyNguyen,andTuanDanhDuong AuthorizedfordistributionbyEraDabla-NorrisSeptember2022 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:UsingauniquerepresentativepanelsurveyofVietnameseenterprisesin2020,wefindthatthepandemicandassociatedgovernmentsupportpackagehadaheterogenousimpactacrossfirms.Thegovernmentsupportpackage,particularlytaxcutsanddeferrals,helpedalleviateshorttermstress,buttightineligibilitycriteriaandcumbersomeproceduresimpactedtake-up.Econometricanalysissuggeststhatthelikelihoodofaccessingsupportwasassociatedwithfirmsize,withlargerfirmsmorelikelytoreceivesupportcomparedtosmallerfirms,evenaftercontrollingforsector,firmownershipandfinancialhealth.Creditsupportwaseffectiveinalleviatingliquidityconstraintsandallayingfirmpessimismonlyforlargefirms.Interestingly,firmsexperiencingsaleslossesandthosewithlowerpre-crisisproductivityweremorelikelytoresorttodigitalization,suggestingthatthepandemiccouldhelpnarrowproductivitygaps. JELClassificationNumbers: G30,G38,H71,L25,L53 Keywords: COVID-19;policysupport;firms’copingstrategies;digitalization Author’sE-MailAddress: edablanorris@imf.org,anguyen4@imf.org,yzhang@imf.org,duongnt@gso.gov.vn,ngaph@gso.gov.vn,tuandd@gso.gov.vn 1TheauthorsaregratefultoNguyenThiVanAnhfortheexcellentcoordination,Anne-MarieGulde-Wolfe,FrancoisPainchaud,andparticipantsattheIMFAPDdepartmentseminar,theInterdepartmentalWorkingGrouponCorporateSectorIssues,andtheGeneralStatisticsOfficeofVietnamseminarfordiscussions.Allremainingerrorsareourown. WORKINGPAPERS UnpackingImpactofCOVID-19onVietnameseFirms:EvidencefromaNovelSurvey PreparedbyEraDabla-Norris,AnhThiNgocNguyen,YuanyanSophiaZhang,ThuyDinhPham,NgaHuongPhi,DuongThuyNguyen,andTuanDanhDuong TableofContents 1.Introduction5 2.DataandEmpiricalApproach7SurveyDescription7EmpiricalApproach8 3.SurveyResultsatFirstGlance10ImpactofCOVID-19onBusinessActivities10ResponsetotheCrisis:SelfCopingStrategiesandGovernmentSupport12 4.Empiricalresults15LikelihoodofReceivingGovernmentSupport15EffectivenessofGovernmentSupport16WhatFirmsEngagedinDigitalization?19 5.ConcludingRemarks20References28 1.Introduction COVID-19presentedanunprecedentedshocktofirmsaroundtheworld.Inresponse,governmentsputinplacearangeoffiscalandfinancialsupportmeasurestokeepbusinessesafloatandlimittheeconomicfallout.2Whichfirmsbenefitedfrompolicysupport?Howeffectivewerefirms’self-copingstrategiesandgovernmentsupportmeasuresinalleviatingliquidityconstraints,reducinguncertainty,andallowingfirmstosurvive?Wastheimpactheterogenousacrosspoliciesandadjustmentstrategies?Answerstothesequestionsarecriticaltounderstandthereallocationchannelsatworkandtodesignbetterpoliciesthatcanhelpsmooththeimpactoffutureshocks. Inthispaper,weaddressthesequestionsbyrelyingonalarge-scalerepresentativesurveyofenterprisesinVietnam,adynamicemergingmarketeconomy.AlthoughVietnamwasamongthetopperformingcountriesin2020duetoitsearlyanddecisivepandemiccontainmentpolicies,thecorporatesectorwashithard.Businesssalesplungedby60percentinthefirstfourmonthsof2020(GSO,2020).Inresponse,thegovernmentofVietnamintroducedwide-rangingmeasurestosupportaffectedfirms.Fiscalsupportforfirms(estimatedataround3.7percentofGDPin2020)largelytooktheformoftaxcutsanddeferrals(IMF,2021).Inaddition,acreditsupportpackageofaround3.9percentofGDPcomprisingloanrestructuringandinterestratereductionswasalsorolledoutinearly2020. Weexploittwowavesofanenterprisesurveyconductedin2020toexaminetheimpactofCOVID-19onfirmsandevaluatetheefficacyofgovernmentsupport.Thesurveyprovidesinformationontheimpactofthepandemiconbusinessesaswellasfirmaccesstopolicysupportbysize,sectorandfirmownership,includingself-reportedconstraintsforover100,000firmsineachround.Further,thesurveyincludesinformationonself-copingadjustmentsundertakenbyfirms.Wefirstempiricallyexaminehowthelikelihoodofreceivingsupportdiffersbyfirmcharacteristicsandeconomicperformance.Wethenexaminethelikelihoodoffirmsurvivalinlightofgovernmentsupportmeasuresandvariousself-copingstrategiesadoptedbyfirms.Finally,weexaminehowthelikelihoodofadoptingdigitalizationvariesacrossfirmsandsectors. Ourfindingsrevealthatpolicytake-uprateswereinitiallylowmainl