European businesses’ confidence on Vietnam outlook reaches highest since Covid-19 emergence

Business Climate Index (BCI) measuring sentiment of European enterprises in Vietnam hit 73.9 points in the first quarter of 2021, the highest score recorded since the third quarter of 2019, before the Covid-19 pandemic took toll on global trade and investment.

EuroCham's BCI movement.

The EuroCham revealed the latest data, saying this continues a positive upward trend in the index, with the score rising more than 47 points over the last 12 months.

“The BCI confirms once again that Vietnam is open for businesses. While countries continue to struggle with the impact of Covid-19, Vietnam has ensured that companies here can continue their operations as close to normal as possible. This is helping to drive economic growth and fuel the confidence of European business leaders,” EuroCham Chairman Alain Cany said.

“Therefore, it is no surprise that EuroCham members are positive about the future of their own companies and optimistic about the prospects for Vietnam’s trade and investment environment. The BCI has now almost climbed back to pre-Covid levels – this is a remarkable achievement and further evidence that Vietnam is on the right path to achieving its twin goals of protecting health and promoting economic growth,” he added.

The data came after Vietnam recorded strong economic growth of 4.48% at the start of 2021, and this is reflected in the optimistic outlook of European enterprises. When asked about the prospects of Vietnam’s business environment in the next quarter, 67% predicted either ‘excellent’ or ‘good’ – a 12% increase compared to the previous quarter.

Production of electric components at A Chau Industry Company in Thuong Tin district. Photo: Thanh Hai

Meanwhile, business leaders are also more optimistic about their own companies. More than two-thirds (68%) predict that their orders and revenue will ‘maintain or increase’ over the next three months. That’s a 25% increase compared to the fourth quarter of 2020.

EuroCham members are also seeing a positive effect from the EU-Vietnam Free Trade Agreement (EVFTA) which entered into force on August 1, 2020. Since it was implemented, more than 60% have benefited from the agreement. However, business leaders continue to report that ‘administrative procedures’ are the biggest barrier preventing them from utilizing the EVFTA.

Thue Quist Thomasen, CEO of YouGov Vietnam, the agency conducting the BCI survey, said the fact that more business leaders are anticipating a rise in their headcounts and investment plan is – in itself – a vote of confidence in Vietnam’s long-term prospects. It shows that companies are investing in their workforce and their businesses now in anticipation of a strong and prosperous 2021.”