Results of the 10th quarterly EuroCham Business Climate Index survey released on March 7 showed that business confidence and outlook among European businesses in Vietnam is improving slightly.

This quarter the level has risen from the recent record low of 45 to 48 points. However, the Index remains below the half-line and EuroCham members that participated in the survey continued to express general concern about their current business situation and outlook as well as the impact of increased taxes, fines and official scrutiny. 

The EuroCham Business Climate Index increased by 3 points to 48. Slightly less 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 or other activities. 

Compared to the last survey, there was a relatively large in- crease in respondents assessing their current business situation as positive from 26 percent to 40 percent.

With respondents holding a neutral view remaining fairly stable at 36 percent, there are still a quarter of respondents holding a negative view of their current business situation.

The business outlook for respondents has also improved slightly: those reporting a neutral view remained stable at 42 percent, with slight improvement in those with a positive view to 30 percent, balanced by a slight decline in negative view to 28 percent.  

Reported investment plans however seem to be stabilizing. There are less companies intending to significantly increase investment, which is down from 11 to 7 percent of the sample; but also less companies reporting the intention to cut investment, which has reduced from 27 to 24 percent.

With the majority of companies i.e 73 percent either expecting to keep their investment at similar levels to 2012, or to increase investment slightly.

Overall some 78 percent of respondents report they are maintaining or increasing their in- vestment, indicating a continued faith in Vietnam’s medium term future.  

Whilst the share of companies expecting revenue to increase remained relatively constant at 45 percent, those expecting a drop in orders fell from 32 to 23 percent, which is a significant improvement. 

Concerns about inflation are declining slightly, though still 45 percent of companies expect inflation to have a significant impact on their business in the medium-term. Members were also asked to indicate what they think the rate of inflation will be and the average came to 5.12 percent.

This continues to decline and is now very significantly below respondents perceptions a year ago, where the average inflation rate was predicted at 7.83 percent.    

Respondents appreciation of the macroeconomic situation is also improving. Whereas last quarter a massive 72 percent expected a further deterioration in conditions, this has now fallen back to 57 percent, though this is still a majority of respondents expecting a further deterioration, and only 43 percent expecting stabilization and improvement.

EuroCham Chairman Preben Hjortlund commented on the survey: “This is welcome news and reflects a perceived stabilization in the macroeconomic situation. However we must remember that the index is still the wrong side of 50 and is well down on the 79 level achieved only 2 years ago. We need now to see continued efforts by the Government to improve the underlying structural problems of the economy“. 

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