EuroCham Index pessimistic about business outlook

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According to results of the seventh quarterly EuroCham Business Climate Index survey, conducted in April/May 2012 and released on May 19, the index decreased three points to 53.

Compared to the previous survey, there was a 10 per cent increase in respondents assessing their current business situation as “not good” to 29 per cent, up from 19 per cent in the last quarter and only 12 per cent one year ago, but 34 per cent described their current business situation as “good.” This is unchanged from the last survey but down from 50 per cent with a positive view on current business one year ago.

Some 40 four per cent of businesses surveyed are in the services industry, 28 per cent in manufacturing, 20 per cent in trading and the rest in other activities.

The baseline of optimism was retained by some firms, with 38 per cent stated a “good” and 36 per cent a “neutral” outlook.  This is almost unchanged from last quarter, but is put into perspective by the 51 per cent of respondents that had a positive business outlook this time last year. Twenty six per cent were pessimistic about their business in the next six months and 62 per cent were neutral or negative, according to the survey. 

When asked about their investment plans for 2012, many respondents remain cautious. Some 34 per cent want to maintain their level of investment and 38 per cent are looking to increase their investment in Vietnam. That is a slight increase from 36 per cent in the last survey, but still a significant fall from 59 per cent aiming to increase their investments this time last year.

Meanwhile, 28 per cent of businesses are looking to reduce their overall investment in the country, up from 24 per cent last quarter and only 8 per cent in early 2011. This result is the continuation of a downward shift in confidence in Vietnam. While the majority of companies are looking to maintain and increase their investments in the country, it is worrying that nearly a third of companies in this survey are considering a reduction of their investments here.

When giving the estimate for the expected percentage of VND depreciation, the average of all answers was 5.63 per cent, down from 8.33 per cent last quarter hinting towards an increase in confidence towards government measures to curb inflation. However, 57 per cent of respondents still saw inflation as a major concern or even threat to their business operations in Vietnam. Slightly less than the 61 per cent reported major inflation effects on their business last time, but inflation remains a major concern.