Although some local experts drum up positive economic signs recently, European businesses continue to be cautious about the overall economic outlook in Vietnam as found in the latest survey of the European Chamber of Commerce in Vietnam (EuroCham).
Last week, EuroCham publicized its business climate index for the second quarter of 2012 after surveying its member companies in April and May, with 44% of the respondents active in services, 28% in manufacturing, 20% in trading and the rest in other sectors. The result was that the index inched down three points to 53 compared to the first quarter.
EuroCham Chairman Preben Hjortlund said that the continuing low level of the index at 53 points indicated ongoing concerns and uncertainty in the business community.
“While there are some encouraging signs, the overall business sentiment is stagnating at a relatively low level,” Hjortlund commented on the survey.
Results of the seventh quarterly EuroCham Business Climate Index showed an unpromising business situation, as 29% of the respondents assessed their current business as ‘not good’ compared to 19% in the first quarter of 2012. On top of that no respondent described their current situation as ‘excellent’.
Little optimism in business outlook was easily recognized in the survey, as only 38% and 36% of the respondents stated a ‘good’ and ‘neutral’ outlook respectively, lower than the 51% of respondents that had a positive business outlook this time last year. In the newest survey, some 26% of respondents had a pessimistic outlook for their business in the next six months.
European companies expressed mixed attitude towards investment plans. When asked about their investment plans this year, 38% said they were looking to expand their investments in Vietnam, up two percentage points over the previous survey but still much lower than 59% in the same period last year.
“This shows a continuation of the trend that businesses are getting more cautious about investing,” EuroCham said. EuroCham had more results to prove as 28% of businesses in the survey said they were looking to reduce their overall investment in Vietnam, up from 24% last quarter.
“This result is the continuation of a downward shift in confidence to invest in Vietnam. While the majority of companies are looking to maintain and increase their investments in the country, it is worrying that nearly a third of companies in this survey are considering a reduction of their investments here,” EuroCham noted.
However, the survey has positive results related to revenue and inflation. Up to 58% expected revenue increases in the medium term, or higher than 47% in the first quarter.
“Overall, this represents an upward trend in the outlook on revenue/orders for the last two quarters. This trend has yet to have an effect on recruitment plans with the majority (46%) of companies wanting to maintain their current level of staff,” EuroCham said.
There is also a rise in the confidence of European businesses in the Government’s measures to tame inflation. However, 57% of respondents still ticked inflation as a major concern or even threat to their business operations in Vietnam.
As for the macro-economic problems in Vietnam, 45% of respondents opted for ‘stabilization and improvement’ of the current situation, up 10% from last quarter. EuroCham said this was an increase in confidence.
EuroCham said further progress on a Vietnam – EU Free Trade Agreement (FTA) would underpin an increase in business confidence and “lay the foundations for future investment increases from Europe.”
The Saigon Times Daily