Survey shows VN yet to win over European businesses

But EuroCham members who participated in the survey expressed increasing concern about their current business situation and fear of increased inflation levels as well as the overall macroeconomic outlook in Viet Nam.

The survey also found that in the last six months around a fifth of the respondents considered shifting to another ASEAN market.

More than half of the businesses polled are active in the services industry, a quarter in manufacturing, and the rest in trading and other activities.

The Business Climate Index, which turned around in the last two quarters, now remains stuck at the mid-point.

This is largely due to the reduction in the number of respondents assessing their current business situation as positive – from 43 per cent to 38 per cent – and increase in respondents having a negative view.

But, looking to the future, the business outlook has seen continued improvement with respondents having positive expectations, rising to 51 per cent from 43 per cent last quarter and 30 per cent the previous quarter.

This is a clear demonstration of the fact that EuroCham members are committed to Viet Nam in the long term.

However, investment plans are decreasing with the number of respondents expecting to raise investments in Viet Nam decreasing from 42 per cent to 34 per cent.

The number of companies intending to "significantly increase investment" has returned to the levels of the first quarter of 8 per cent from last quarter’s 13 per cent and 20 per cent one year ago.

In addition, there has also been a slight increase in members expecting to pare their investments in Viet Nam from 19 per cent last quarter to 21 per cent.

Business orders expected

When asked about their expected number of orders and revenues in the medium term the answers have continued their positive trend.

While the share of companies expecting a drop in revenue remains at 17 per cent, the number of respondents expecting it to increase has further improved from 53 per cent to 61 per cent, a significant improvement and a return to the same level as a year ago.

Medium-term orders, hiring plans stable.

But the positive development in revenues has not translated into increased recruitment plans, with the number of respondents expecting to raise hiring being roughly the same as those expecting to decrease.

Inflation concerns

Concerns about inflation have returned, with 43 per cent of respondents finding that inflation could have a significant impact on or even threaten their business.

But this is still a slight improvement from last year’s 49 per cent.

Members were also asked to indicate what they think the rate of inflation will be, and the average polled was 5.94 per cent.

This represents a noticeable difference from last quarter’s estimate of 5.13 per cent.

Last quarter only 48 per cent of respondents expected a deterioration in the macroeconomic environment. This quarter respondents’ appreciation of the economic situation has taken a turn for the worse, with a majority of respondents (60 per cent) now expecting the environment to further deteriorate.