Business optimism climbs in Q1

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The percentage of companies with a positive outlook rose from 62 per cent to 80 per cent during the period, placing Vietnam in the seventh position globally in terms of business optimism, said the firm's latest world business report.

The survey targeted chief executive officers, managing directors, chairmen and other senior executives in over 5,700 private- businesses in 39 economies worldwide, in manufacturing, services, retail, construction and other sectors.

The survey found that overall global business optimism stood at 34 per cent, its highest level since early 2008, but mature economies around the world gained on their emerging market competitors in terms of business optimism during the first quarter, with the gap narrowing dramatically in a short period of time, the report said.

While this suggested that imbalances in the economic recovery from country to country might begin to ease, emerging markets in Latin America remained the most optimistic in their economic outlook.

Between the last quarter of 2010 and the first quarter of this year, the G7 group of economies saw an upswing of 16 percentage points in optimism for the prospects for their country's economy.

In contrast, optimism levels in Latin America declined (4 percentage points), with optimism in the BRIC group of economies (Brazil, Russia, India, China) increasing marginally, by 3 per cent.

The US also witnessed a surge in optimism, up 19 per cent to 42 per cent, and Italy registered a 30 percentage point upswing, to 43 per cent. Japan, although still the most pessimistic of all economies surveyed, saw its business optimism increase by 13 percentage points.

"Although there has been a two-speed recovery, with emerging markets generating growth faster than mature markets, there are early signs that inroads are being made to address this imbalance," said the firm's managing partner here, Ken Atkinson.

"Confidence has increased significantly over the past quarter in G7 economies," Atkinson said. "This mirrors what we have seen in financial markets as mature economies are being viewed more favourably since the turn of the year. A global recovery without the US is difficult to envisage, so it is encouraging that growth and a fall in unemployment appear to be giving cause for greater optimism. This should give cheer to emerging as well as mature economies."

"Emerging markets are grappling with global imbalances and business constraints, and this has undoubtedly had an effect on confidence," said the firm's auditing partner Alan Dy, noting the impact of rising inflation and interest rates in many of these markets.

"Overall, we would expect the gap in optimism to continue to close as emerging markets face constraints on growth," Atkinson added. "The ongoing political turmoil across North Africa and the Middle East could have a real impact on the outlook of businesses in a number of economies. Big oil-importing countries, and many businesses within them, will look on with some discomfort should unrest in these regions continue to spread and push up oil prices further."

The survey also found that 43 per cent of Vietnamese businesses believed that a shortage of skilled labour would constrain their ability to grow this year – a 10-percentage-point upswing from the previous quarter.

BRIC and Latin America shared the same concern, with 42 and 43 per cent of businesses, respectively, citing a lack of skilled labour as a constraint.

About half of privately-owned businesses in India and Brazil also responded that a shortage of skilled labour this year would constrain their ability to grow.

The problem was also a major issue for 40 per cent of businesses in China, 46 per cent in Thailand and 37 per cent in South Africa.

"A lack of skilled workers will weigh on the confidence of businesses in emerging markets and they will find this a very real obstacle to their growth," said Atkinson.

"A clamour for skilled people will cause wages to rise. This in turn will inflate selling prices and narrow the competitive advantage in some emerging economies."

"In the long term, governments will need to address how they appropriately educate and skill their people in order to fuel economic growth," added Dy. "For now, observers will be looking to see the inflationary pressures it will create."