A decreased fear of inflation and hope for the conclusion of the EU-Vietnam Free Trade Agreement (FTA) later this year have shored up European businesses’ trust in Vietnam market, a new survey found.
The European Chamber of Commerce in Vietnam (EuroCham) said its latest quarterly Business Climate Index survey, conducted this month, showed the index has for the first time since 2012 gone above the midpoint - from 50 to 59 points.
“The increase of 9 points seems to suggest that this is more than just post-Tet optimism, with a genuine belief in improved business conditions and outlook appearing,” said Preben Hjortlund, Chairman of EuroCham.
Compared to last quarter’s survey, the number of respondents assessing their current business situation as positive has jumped from 38 percent to 45 percent. This is even higher the rate of 40 percent of Tet last year.
Though 42 percent of the respondents found the past year to be more profitable, it should be noted that a considerable 32 percent found the past 12 months to be less profitable.
Looking to the future, the business outlook for respondents has equally experienced a considerable improvement with members having positive expectations rising to 49 percent compared to last quarter’s 44 percent and significantly higher than last year’s 30 percent.
This positive outlook might be linked to the likely conclusion of the EU-Vietnam FTA later this year, the successful resolution of a number of issues from the EuroCham Whitebook and the continued strong collaboration with the Vietnamese government, according to the survey.
At the same time, 30 percent keep a negative outlook, higher than last year’s findings (28 percent).
In line with 70 percent of the respondents see a rise in business orders and 78 percent plan to keep or increase their investment, 48 percent expect to raise their headcounts.
Respondents remain somewhat confident in the macroeconomic outlook, with 47 percent expecting “stabilization and improvement” (same as previous quarter) and 23 percent fearing a further deterioration.
At the same time, the number of respondents expecting inflation to have a “significant or threatening impact” on their business remains limited (29 percent) compared to the past (45 percent last year). On average, EuroCham members predicted the inflation rate will be 3.68 percent this year, significantly down from last quarter’s estimate of 4.69 percent.
Respondents expressed their belief that the various economic and administrative challenges will be positively addressed in the coming time. They also gave other reasons for their continued investments in Vietnam: the size of the market and consequent business opportunities, labor costs and the relatively young population.
Just under half of the businesses participating in the survey are active in the services industry, a quarter in manufacturing, one fifth in trading and around ten percent are engaged in other activities.