EuroCham Forecasts “Stabilization And Improvement” In Vietnam For Q1 Of 2021

Before the new coronavirus outbreak in Hai Duong emerged in late January, Vietnam went nearly two months without community-transmitted infections. The country’s targeted mass testing and strict quarantining help kept the virus tally low, resulting in confidence and optimism not just among the locals but among foreign business leaders and investors as well.

The latest Business Climate Index (BCI) of the European Chamber of Commerce (EuroCham) showed European business leaders ended 2020 more optimistic about Vietnam’s trade and investment environment than at any point since the pandemic began.

BCI, a regular barometer of EuroCham members and key indicator of economic activity in the country, climbed six points in the Q4 of 2020 to reach 63.6. In total, the index rose 37 points over the course of last year, after falling to a historic low of 26.7 in Q1 2020 when Vietnam recorded its first COVID-19 case.  The BCI has continuously bounced back since then, as the country navigates through the “new normal” of doing business.

Citing Vietnam’s speedy and strategic outbreak containment in the past year, at least 57% of EuroCham members predicted “stabilization and improvement” in the first three months of 2021. This is remarkably higher than the 39% confidence rate in the third quarter of 2020. Only 10% of the BCI respondents believed that the economy is likely to deteriorate.

Furthermore, one-third of the EuroCham members also predicted a rise in their head count in the next quarter; 30% anticipated a rise in investment and 43% predicted a rise in orders and revenue.

“Our latest BCI paints a positive picture of Vietnam’s business environment as we look ahead to 2021. The growth in confidence we have seen over the last 12 months is a testament to the government’s swift and effective handling of COVID-19, and creates a strong foundation for the next five years of Vietnam’s socio-economic growth,” said EuroCham Chairman Nicolas Audier.

Thue Quist Thomasen, CEO of YouGov Vietnam echoed the same positive sentiment, adding that Vietnam’s trade and investment environment stands in contrast to the situation elsewhere in the world.

High hopes for EVFTA

While most parts of the world are still in lockdown and businesses have been restrained on large scales, it is business as usual in the Southeast Asian country.

In fact, EuroCham members are optimistic about their business performance, and are looking forward to a great 2021.

The implementation of the EU-Vietnam Free Trade Agreement (EVFTA) in August last year also paved the way for an increased trade between Vietnamese and European investors and entrepreneurs.

EVFTA, an ambitious trade deal that provides almost 99% of the elimination of custom duties between the two territories, is seen to increase Vietnam’s GDP by 4.6% and its exports to EU by 42.7% by 2025. The European Commission, on the other hand, forecasts EVFTA to bring a GDP increase of $29.5 billion by 2035.

In an encouraging start, about 60% of EuroCham members said that their businesses had already benefited from the EVFTA since it came into force six months ago.

But while 82% of business leaders have concrete understanding of the trade agreement and its implications and 50% believe in its relevance, at least 33% expressed that administrative procedures could be main barriers for them to utilize EVFTA in their business.

Audier noted, “European business leaders are looking forward to the increased trade and investment that the agreement will bring, while also highlighting some of the issues which need to be addressed to ensure its smooth and successful implementation.”

Taking full advantage of the EVFTA, according to both EuroCham and the Vietnamese government, will be key to the success of Vietnamese businesses in the future. But before seeing the pact’s full potential to accelerate economic progress, both parties need to immediately remove bottlenecks faced by businesses.