European investors upbeat about Vietnam as business confidence rebounds

Business confidence among European investors has turned around in the third quarter

The BCI, which was conducted by YouGov Vietnam, has rebounded in the third quarter. The BCI jumped 24 points to reach 57.5 – the highest score since the outbreak of the global COVID-19 pandemic.

The BCI is a regular barometer of EuroCham members and their perceptions of the trade and investment environment. Each quarter, it tracks the performance of EuroCham’s member companies and their perceptions of the economic outlook in Vietnam.

In the first quarter, when COVID-19 first hit international trade and investment, the BCI fell to 26 points. It saw a slight increase in the second quarter as Vietnam became one of the global success stories of the pandemic. Now, with businesses able to operate with far fewer restrictions and the EU-Vietnam Free Trade Agreement (EVFTA) entering into force on August 1, the confidence of European business leaders has seen a strong resurgence.

Business leaders were more positive about their own enterprise in the third quarter, with 40 per cent describing their performance as either “Excellent” or “Good” – more than double the 18 per cent recorded in the previous three-month period. The fourth quarter looks to be even more promising, with 44 per cent predicting a strong end to 2020. Meanwhile, most companies are anticipating stabilisation in their headcount (65 per cent) and investment plans (57 per cent), with just under half (44 per cent) expecting to see an increase in their revenue and orders.

With the EU-Vietnam Free Trade Agreement (EVFTA) entering into force in the third quarter, the BCI also asked EuroCham members about its impact on their business and investment plans. One-third said that the agreement was an important part of their decision to invest in Vietnam, with the top two factors predicted to drive growth being tariff reductions (33 per cent) and greater market access for investors (13 per cent).

Nicolas Audier, Chairman of EuroCham, said that, “Despite a difficult 2020 for international trade, our data shows that Vietnam’s swift and effective response to the global pandemic has paid dividends. European business leaders feel more positive both about their own enterprises and Vietnam’s trade and investment environment, and report a sense of cautious optimism going into the fourth quarter."

“The implementation of the EVFTA in August has, no doubt, helped to boost this growing confidence. Our data shows that falling tariffs and growing market access are important to our members, and will help to spur new foreign-direct investment from the EU in the future.”

Thue Quist Thomasen, CEO of YouGov Vietnam, added that, “Drilling down into the data, we can see some of the trends that underlie the jump in positive sentiment in more detail. In short, business leaders are reporting a sense of cautious optimism in their own companies, and this is driving confidence in Vietnam’s macroeconomic prospects in the next quarter."

“In particular, the proportion of business leaders predicting an increase in their orders or revenue in the next three months has risen by 20 per cent – from 24 per cent in the second quarter to 44 per cent in the third. Meanwhile, 23 per cent of business leaders expect to hire more staff in the next three months, compared to 14 per cent in the last BCI. Together, these signals point to a positive end to 2020.”