Business confidence plummets in second quarter

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WVB Vietnam Financial Intelligence Services (WVB FISL) surveyed 127 businesses in 11 primary sectors and industries in Vietnam between May 18 and the beginning of July. Of those that responded, 78 per cent were small – and medium-sized companies.

Most businesses expressed a lack of confidence in the country's economic recovery this year.

Respondents said more time is needed for the government's macroeconomic policies to bear fruit and restore business confidence.

Just 38 per cent of firms questioned said that they thought the overall economic outlook had improved compared to a year ago, while 12 per cent thought it had worsened. However, 53 per cent of companies were confident the economy would improve over the next 12 months, while 10 per cent predicted a dismal 2012.

Despite the bleak predictions, 44 per cent of enterprises said they planned to increase their work force, while 33 per cent said they would invest more in fixed assets over the next 12 months.

A mere 20 per cent of businesses were confident sales revenues would increase over the next year – a 47.8 per cent decrease compared to the previous quarter. Meanwhile, 41 per cent thought their profits would increase in 2012 – a 23 per cent decline over the first quarter.

The WVB FISL also asked businesses to comment on hot issues, such as wage rises to offset the impact of rising inflation, government measures to halt the unofficial interest rate war among banks, sluggish stock market, Vietnam's trade balance and inflation.

In response, 51 per cent of enterprises said pay rises would depend on business results, while 71 per cent said the central bank should impose caps on both deposit and lending rates.

Only 23 per cent said the poorly performing stock market had affected their business, while 45 per cent thought Vietnam's trade deficit would continue to increase. Meanwhile, 72 per cent expected annual inflation this year to reach 15-20 per cent.