Positive signs abound for business operation lift

July 19, 2023 | 14:00
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Confidence among the business community is slowly bouncing back, supported by government efforts to provide a more business-friendly climate.
Positive signs abound for business operation lift
Positive signs abound for business operation lift, illustration photo/ Source: freepik.com

In June last year, Nguyen Van Khai halted the operation of his garment factory in Hanoi due to a lack of export orders. The factory was opened in 2017 and is the third he had opened in the northern region since 2015.

That August, a second factory based in Hung Yen province followed suit, leaving the first factory operating in moderation.

Since February this year, the two factories with suspended operations have resumed operations as a number of major contracts have been landed. This means nearly 1,000 workers have incomes again.

“We are happy that all of our three facilities are in full operation now,” Khai said.

Khai’s company is among nearly 37,700 enterprises resuming operation in the first half of this year throughout the country.

According to the General Statistics Office (GSO), in the first six months of this year, Vietnam saw over 75,900 newly established businesses registered at $29.48 billion, using nearly 509,900 workers. If another $39.94 billion registered by 25,200 operational enterprises is included, the total capital supplemented into the economy in the period is $69.42 billion.

In June, the number of newly established businesses hit nearly 14,000 registered at $5.78 billion, and employing 103,900 workers – up 14.9 per cent in the number of enterprises, 33.7 per cent in registered capital, and 39.2 per cent in the number of workers, compared to May.

Besides this, the economy in June also witnessed 7,100 businesses resume operations – up 19.3 per cent on-month and 3.2 times on-year.

According to the GSO, these are “extremely positive signals” for the economy, as production activities remain challenged.

“Despite difficulties lingering, domestic production and business have been gradually recovering. The confidence of enterprises is also escalating,” the Ministry of Planning and Investment reported to the government last week.

In the first half of the year, the total number of enterprises newly established and resuming operations hit 113,600, down 2.9 per cent on-year.

Under a survey conducted by the GSO in Q2 of 2023, the business community’s confidence in the government’s macroeconomic management is on the rise. Up to 72.6 per cent of surveyed companies forecast that their performance in Q3 will be better than and keep stable as it did in Q2.

Of which state-owned enterprises are the most optimistic, with a rate of 74.5 per cent of respondents projecting their performance will be better than and keep stable as compared to Q2. This rate is 73 and 71.1 per cent for domestic private businesses and foreign-invested ones, respectively.

In reality, the added value of the economy’s industrial sector rose from 0.75 per cent in Q1 to 1.56 per cent in Q2, meaning a gradual recovery in industrial production.

According to global data analysts FocusEconomics, Vietnam’s industrial production is expected to expand 5 per cent in 2023 and 8.4 per cent in 2024.

At the government’s meeting on Vietnam’s economy in the first half of 2023, Prime Minister Pham Minh Chinh said that despite difficulties with a drop in industrial production, the economy was expected to continue bouncing back in the coming months.

“Confidence of enterprises and investors are bouncing back, facilitating the economy to get bigger growth, with more jobs to be created,” PM Chinh said.

With a view to fuelling the economy and supporting enterprises and investors, the government will enact a resolution on the socioeconomic development plan from now until the year’s end, as well as on continuing measures to improve the domestic business climate and enhance national competitiveness.

The resolution aims to achieve the goal of securing an economic growth rate of 6.5 per cent for 2023, with improvements in national economic competitiveness, and in the local investment and business climate.

Continued weak external demand and global uncertainties are adversely affecting the economy, translating into contraction in exports and imports, and a slowdown in industrial production. While domestic consumption remains robust and comparable to pre-pandemic levels, credit growth continues to slow, reflecting weak credit demand. If global financial conditions tighten more, external demand may weaken further.

As inflation appears to be tapering, the State Bank of Vietnam eased monetary policies to support the economy. However, monetary policy authorities will need to closely monitor whether the divergence in the monetary policy stance between Vietnam and other countries is creating pressures on capital flows and exchange rate.

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By Thanh Thu

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