Corporate Vulnerabilities in Vietnam and Implications of COVID-19

IMF Working Papers, November 20, 2020

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Canonical URL: Corporate Vulnerabilities in Vietnam and Implications of COVID-19

The paper uses firm-level data to assess the financial health of the Vietnamese non-financial corporate sector on the eve of pandemic.
Analysis finds that smaller domestic firms were particularly vulnerable even by regional comparison.
A sensitivity analysis suggests that the COVID-19 shock will have a substantial impact on firms’ profitability, liquidity and even solvency, particularly in the hardest hit sectors that are dominated by SMEs and account for a sizeable employment share, but large firms are not immune to the crisis.
Risks of default can propagate more broadly through upstream and downstream linkages to industries not directly impacted, with stresses potentially translating into an increase in corporate bankruptcies and bank fragility.
Policy measures taken in the immediate aftermath of the crisis have helped alleviate liquidity pressures, but the nature of policy support may have to pivot to support the recovery.

Smaller domestic firms showed greater balance sheet vulnerability relative to regional peers.
COVID-19 shock projected to affect:
- Profitability
- Liquidity
- Solvency
Hardest hit sectors are dominated by SMEs and account for a sizeable employment share.
Large firms are not immune to COVID-19-related stresses.
Default risks can transmit through upstream and downstream linkages to indirectly affected industries.
Potential macro-financial consequences include an increase in corporate bankruptcies and bank fragility.

Hardest hit sectors: sectors dominated by SMEs and significant employers (sector names not enumerated on the page).
Firm-level vulnerabilities emphasized: leverage, liquidity constraints, interest payment obligation, and profitability metrics referenced in keywords.

Direct COVID-19 shock to sectors → declines in firm profitability and liquidity.
Indirect propagation via upstream and downstream linkages → spillovers to industries not directly impacted.
Systemic concerns: higher corporate bankruptcies → potential bank fragility.

Immediate post-crisis policy measures have helped alleviate liquidity pressures.
Policy support may need to pivot from immediate liquidity relief toward facilitating recovery (nature of pivot not specified on the page).

Subject: Asset and liability management, COVID-19, Currencies, Economic sectors, Financial statements, Health, Liquidity, Money, Public financial management (PFM), Services sector
Keywords: ASEAN, balance sheet condition, Corporate Vulnerability, COVID-19, credit access, Currencies, Debt at risk, enterprise survey, FDI firm, Financial statements, Global, interest payment obligation, Leverage, Liquidity, liquidity constraint, Profitability, service sector firm, Services sector, solvency condition, WP