Results of the 11th quarterly EuroCham Business Climate Index survey, conducted in May 2013 and released recently by EuroCham, show that business confidence and outlook among European businesses in Vietnam continues to improve, even if hesitantly. This quarter the Business Climate Index has risen to the midpoint – from 48 to 50 points – following three quarters below 50. This is the second consecutive increase, and it seems to suggest that European companies are regaining trust in the Vietnamese market.
Slight increase in business orders and revenue
The key indicators of this development are the improved business outlook, the increase of revenue/orders and optimism about the overall economic outlook. However, it is important to keep in mind that the BCI remains at 50, far below the highpoint of 79 in 2011 and that the improvements over the last two quarters remains limited, with an increase of 2 points per quarter.
More than half of the businesses that participated in the survey are active in the services industry, a quarter in manufacturing and the rest in trading and other activities. Business Climate Index is at 50 points, meaning continued improvement in current business situation and business outlook. In line with EuroCham’s last survey, there has been a continued increase in respondents assessing their current business situation as positive – from 40 percent to 43 percent. The previous quarter already saw a rise from 26 percent to 40 percent and the current level therefore represents a fortification of this improved business sentiment. However, a quarter of the respondents keep a negative view of the current situation, a number which has remained stable for a period of time.
Looking to the future, the business outlook for respondents has seen a significant improvement with members having positive expectations rising from 30 percent to 43 percent, a development which may be linked to the ongoing EU – Vietnam Free Trade Agreement (FTA) negotiations. Yet, this still means that 57 percent assess their outlook as either ‘neutral’ or ‘negative’.
According to the report, investment plans remain positive. Reported investment plans also seem to be improving; more companies are intending to ‘significantly increase investment’, having doubled from last quarter’s 7 percent to 13 percent. Overall, investment plans look more positive than they did a year ago, with 76 percent of respondents either expecting to keep or increase their investment levels versus 72 percent one year ago and the number of respondents expecting to cut investments further declined to 19 percent from last quarter’s 24 percent. This again indicates a returning faith in Vietnam’s medium term future and that Government initiatives are inspiring increasing confidence and optimism.
When asked about their expected number of orders and revenue in the medium-term the answers have also slightly improved. Whilst the share of companies expecting revenue to increase improved from 45 percent to 53 percent, those expecting a drop in orders fell further from 23 percent to 16 percent, which is a significant improvement. In other words, 84 percent of respondents consider their orders/revenue to remain constant or to improve. This positive development has also had a positive impact on recruitment plans, with 39 percent expecting to increase headcount versus 14 percent expecting to decrease – a very positive ratio. Comparatively, the numbers at the same time last year were 33 percent and 19 percent, respectively. Government initiatives and the prospect of a strong FTA between EU and Vietnam seem to have led to an increase in confidence in the Vietnamese economy.
Besides, concerns about inflation are declining, with 65 percent of companies expecting inflation to have no, or limited impact on their business in the medium-term, as compared to 55 percent last quarter and up from 43 percent a year ago. Members were also asked to indicate what they think the rate of inflation will be and the average came to 5.13 percent, which is extremely close to last quarter’s estimate of 5.12 percent and down half a percentage point on last year’s 5.63 percent.
A short step on a long road
EuroCham Chairman Preben Hjortlund commented on the survey: “It is encouraging to see EuroCham’s Business Climate Index increase for the second quarter in a row – and especially that it has now reached the midpoint of 50. It reflects a perceived stabilization in the macroeconomic situation as well as the continued belief of European businesses in the Vietnamese economy. However, we must remember that even if this represents an important step in the right direction, it is a small step on a long road. We need to see continued efforts by the Government to improve the underlying structural problems of the economy as well as a strong and well implemented FTA.”
EuroCham Executive Director Paul Jewell added that: “The Business Climate Index has experienced incremental improvements across the indicators for the second time in a row – something which we have actually never experienced since the BCI was launched back in 2010. This is a very healthy sign as it demonstrates that European companies are slowly regaining trust in the Vietnamese market. However, it is also important to note that we are still only at the midpoint – in other words, we are only half-way there. And the BCI needs to significantly improve, if Vietnam is to remain competitive within ASEAN”.
Quynh Anh
Đăng ký: VietNam News
