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Tuesday, June 18, 2024

European businesses optimistic about Vietnam’s business environment

By Hung Le

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HCMC – European businesses have become more optimistic about Vietnam’s business environment following the end of lockdowns and the new normal of post-pandemic trade and investment, according to the Quarter 3 Business Climate Index (BCI), a regular barometer of the perceptions of business leaders from the European Chamber of Commerce (EuroCham).

The latest BCI saw a small but encouraging uptick to reach 18.3 points, representing a three-point rise from its historic low of 15 points during the depths of the fourth Covid-19 wave in September. 

Although the index remains low, the BCI uncovered improving perceptions about Vietnam’s economic outlook. Just under half of business leaders and investors (49%) now predict a stabilizing and improving economic outlook next quarter, compared to less than a fifth (19%) in Quarter 2.

However, business leaders remain cautious over their recruitment, investment, and profit projections. Companies are taking a wait-and-see approach to staffing, with around one-fifth planning to hire more workers in the next three months, a figure consistent with the last quarter.

Likewise, the proportion of business leaders planning to maintain or increase their investment in Quarter 4 (69%) is just two points higher than in Quarter 3, with revenue projections seeing a similar increase. 

Meanwhile, around half of companies are still operating at reduced levels compared to before the pandemic, while prolonged travel restrictions and staff shortages continue to affect two-thirds of companies. This indicates that there are still issues to be addressed if Vietnam is to reach its full potential in post-pandemic trade and investment.

Commenting on the latest BCI, Alain Cany, chairman of EuroCham, said, “Though the BCI remains low in historical terms, the most important thing is that the index is now moving in the right direction. With the pandemic now back under control in Vietnam, the confidence and optimism of European business leaders should continue to climb as companies get back to normal and consumer confidence rises.”

However, despite the positive progress, business leaders are still encountering challenges in their commercial operations. With two-thirds of companies suffering the impacts of travel restrictions and staff shortages, this highlights the urgent need to speed up the entry of vaccinated experts and accelerate the vaccination of domestic workers.

CEO of YouGov Vietnam Thue Quist Thomasen said, “Beneath the headline BCI figure, some interesting trends are emerging. While confidence in the prospects for the business environment of Vietnam has seen a small but encouraging rise, companies are a little more hesitant when it comes to their own operations.

“This suggests that business leaders are waiting to see how conditions and regulations in the new normal unfold before making significant commitments in terms of investment projects or recruitment plans. Nevertheless, the latest data should give us grounds for cautious optimism in the months ahead,” Thomasen said. 

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