EuroCham BCI Quarter 3/2014 surpasses the previous quarter

EuroCham BCI quarter three 2014 surpasses the previous quarter. Business confidence, notably business outlook and expectations for the future among European businesses in Vietnam, continued to rise. 

Ho Chi Minh City, 23 October 2014, Results of the 16th quarterly EuroCham Business Climate Index (BCI) survey, conducted in September 2014, shows that business confidence, outlook and expectations for the future among European businesses in Vietnam, continues to rise. In the third quarter the BCI climbs from 66 up to 74, approaching the previous levels in the first quarters of 2011. The rise is influenced by high expectancy on the current negotiations of the EU Vietnam FTA. Additionally the survey shows that for a majority of participants the incidents from earlier this year are being put to past. 

With the visit to Vietnam by José Manuel Barroso, President of the European Commission and the continued FTA negotiations, the BCI survey asked the respondents how well informed they are about the content and potential impact of the FTA and if they the FTA will bring about change to their business in Vietnam. More than half the respondents answered that they had somewhat an understanding of what is being negotiated but would want to know more about the current FTA. Four in five respondents also expect that the FTA will bring about changes to their business.    

One in five respondents said they were unaware of what was being negotiated and correspondingly one in five also said that they are not sure if the FTA will bring about any change at all. 

Continued stable and overall positive business situation

When comparing with previous quarter the number of respondents that assert their business situation as positive has seen a slight rise and is now at 48%, the largest group of respondents. The second largest group is respondents that perceive the business situation as neutral. The major change comes from the respondents that perceive the business situation as negative, having declined from 21% last quarter to a single digit at 8% this quarter. Respondents finding the current business situation to be excellent or very poor were both low, 5% respectively. 

This positive improvement and perception of the current business situation is partially a result of a return to normality for several of the respondents in light of the incidents earlier this year.

When asked about the incidents earlier this year and whether or not the business situation has returned to normal, 10% of respondents report that the previous incidents still notably impact their business at this time, 18% said they can still notice some repercussions and 39% of respondents, notably the largest of the three, said that the situation has been restored. This tells us that a full 2/3 of respondents were or is still affected from earlier this year but also that the business situation is largely restored for a majority of them. This in turn reflects the positive perception of the current situation. 

Strong business outlook with high expectations for the coming months

The expectations on the EU Vietnam FTA are clearly expressed as the respondents were asked about the outlook of their enterprises. 62%, roughly two in three respondents perceive the outlook of the next quarter as good. The second largest group of respondents, still at the relatively substantial number of 24%, perceive the outlook of business as neutral.  

To allow for a comparison the BCI asked how the FTA currently being negotiated between EU and Vietnam will counterbalance similar business initiatives made by regional trade partners of Vietnam, such as Korea and Japan. Notably the largest group, around half of the respondents, expects the FTA to be helpful when placed in relation to the other free trade initiatives being negotiated. 

When aligning these two findings we see clearly that the majority holds a positive outlook on the future and that a majority also perceive a future FTA to assist in realizing this positive business environment. 

Stable and improving macroeconomic outlook for Vietnam 

The previous quarters BCI saw 46% expecting stabilization/improvement and 26% expecting deterioration. In this quarter the strong trend of high expectancy continues as 61% of respondents say that the macroeconomic situation in Vietnam will stabilize and improve, 24% say that the situation will not change and 15% expect it to deteriorate. The majority number (around two thirds) also continuously correlate with the percentage of respondents that perceive business outlook positively, and notably correlate with the percentage of respondents that expect a powerful and influential FTA to be signed.  

 A rise in expected inflation rate

The estimations on inflation rate made by participants in quarter three is higher, moving from 4.26% to 4.61%. With high expectations on both macroeconomic stability/improvement as well as general expectations on improved business outlook a moderate rise in inflation is a logical expected outcome. 

EuroCham Chairwoman, Nicola Connolly commented on the results: “The positive perception seems to mirror the numerous media reports, meetings and events held. For example, the visit of President José Manuel Barroso to HCMC, the envisioned FTA as well as the visit of Prime Minister Nguyễn Tấn Dũng to Brussels. Therefore some of the optimism in the BCI is pulled forward by anticipations held by the members and could reverse if these expectations are not met.

EuroCham Executive Director, Csaba Bundik further commented:“We see a clear trend where the European business community is excited and gearing up for the future. The signing of and importantly the realization of the FTA will be crucial steps in assuring that these preparations have not been made in vain

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