Business confidence dips as inflation persists

Retailers are bearing the brunt of a slide in consumer confidence in Vietnam

A new survey by Vietnam WVB Financial Intelligence Services (WVB FIS), a wholly-owned subsidiary of US’ World’vest Base Inc and PetroVietnam Finance Investment and Consultancy Company (PVFC Invest), shows business confidence sliding 21 points in the second quarter – from 109 to 88 points.

The survey was conducted from June 30 to the first week of July with the participation of 127 companies across 11 primary sectors and industries in Vietnam, with 14 per cent of them foreign-invested companies.

It is the third consecutive quarter business confidence has dropped and the strongest decline since the third quarter of 2008.

Fifty-three per cent of companies interviewed said the economic situation in Vietnam would be better within the next 12 months, a 1.5 per cent decrease in comparison with the first quarter of 2011. Ten per cent were worried about the economy’s prospects over the upcoming year and the remaining 37 per cent believed that the domestic economy would stay the same during the next 12 months.

“The responses of the businesses on Vietnam economic conditions have painted a picture of Vietnam’s economy without any bright spots,” said a joint announcement of WVB FIS and PVFC Invest.

Cao Sy Kiem, chairman of Small and Medium-Sized Enterprises Association, said: “Businesses are still having difficulties accessing bank loans, while inflation has jumped each month this year.”

Vietnam’s consumer price index in the first half this year surged 20.82 per cent year-on-year. This forced the government to implement tightened monetary policies, pushing annual lending interest rates for business up around 24-25 per cent.

At the same time, the General Statistics Office reported total retail turnover rose only 5.7 per cent against the same period last year, the lowest growth in recent years. The decline in purchasing power has had a negative impact on businesses’ revenue forecasts. According to the survey, the number of businesses being optimistic about prospects for revenues has decreased by 22.96 per cent in second quarter.

Only 20 per cent were confident that their company’ sales revenues would increase over the next 12 months, decreasing 47.87 per cent in comparison with the first quarter this year, and 72 per cent thought their company’s sales would be the same.

Business confidence has been shaken with two-thirds of firms interviewed saying they would not invest more in fixed asset or even would reduce investment in the upcoming year.

“In the short term, businesses have continued maintaining the plan on cutting down the workforce in their companies and reduced their investment in fix assets to cut down costs,” said the report.

According to second quarter findings of Nielsen global online consumer confidence survey, consumer confidence in Vietnam slumped to 97 points, dropping 1 point from the previous quarter.

In the survey, echoing global concerns, Vietnamese showed more pessimism with only 52 per cent of Vietnamese people believing their job prospects would be “good” in the next 12 months, a decrease of eight points on the previous quarter. Nearly two-thirds (63 per cent) of consumers believe the economy is in a recession and only a third thought Vietnam escape the tough situation in the next 12 months.