31st Sea Games - Vietnam 2021 Covid-19 Pandemic
May 05, 2022 / 10:41

Vietnamese businesses continue strong revival

The rapid decline in Covid-19 cases in Vietnam helped lead to renewed growth of output and employment in April amid a return to more normal business conditions.

The fast resumption of business and production activities during a new normal is evidence of the Government’s efforts to accelerate economic recovery.

 Production of electronics components at Hoa Lac Hi-tech Park, Hanoi. Photo: Thanh Hai

In April, a record number of  15,001 new enterprises were registered in Vietnam, surpassing the previous all-time high of 13,043 during the 2017-2021 period.

The number of workforce in new businesses in April also rose by 10.7% year-on-year to 104,757, while over 7,000 companies returned to operation during the month, up 22.4%.

The latest Business Climate Index (BCI) from the European Chamber of Commerce in Vietnam (EuroCham) revealed the index, which reflects the sentiment of European businesses in Vietnam, has once again reached its highest point of 73 after the fourth wave of the pandemic.

This is a 12-point increase compared to the fourth quarter of 2021, in addition to nearly 58 points of growth compared to the third quarter, with business leaders now more upbeat after the relaxation of Vietnam’s pandemic-related restrictions and the continued acceleration of its economic development, noted EuroCham.

European business leaders showed increasingly improving attitudes towards the prospective growth of Vietnam’s economy. More than two-thirds of respondents believed the Vietnamese economy is more likely to stabilize and improve in the second quarter of 2022 (Q2), compared to 58% who held this view in the fourth quarter of 2021 (Q4). This far exceeds the 5% of respondents who anticipate economic deterioration for the next quarter.

The upward trend of Vietnam’s businesses has also been confirmed in the recent Vietnam Manufacturing Purchasing Managers' Index (PMI), which remained unchanged at 51.7 in April as business conditions improved overall for the seventh successive month.

A reading below the 50 neutral marks indicates no change from the previous month, while a reading below 50 indicates contractions, and above 50 points means an expansion.

With economic activities fast returning to normal, the PMI suggested business confidence ticked higher at the start of the second quarter and was above the series average.

“The rapid decline in Covid-19 cases in Vietnam helped lead to renewed growth of output and employment in April amid a return to more normal business conditions. This provides hope that the sector can now see a sustained period of recovery and expansion,” said Andrew Harker, Economics Director at S&P Global, which complied the report.

"Particularly encouraging was that firms reported the fastest rise in employment for a year due to a combination of new hiring and workers returning to factories as the pandemic situation improved, an issue that has heavily impacted capacity across the sector in recent months,” he added.

More favorable support for businesses needed

The pandemic impact almost froze operation at Phuc Thinh Package company, leading to a 70% decline in revenue during the lockdown period.

This financial difficulty has put more pressure on the company which is obliged to pay over VND850 million (US$37,000) per month in wages, utility costs, and rental fees.

“Thanks to the Government’s support in waiving and freezing corporate income tax and land rental fees, we have managed to cover operational costs and kept business running over the past period,” Director of Phuc Thinh Company Le Phuoc Khanh Tuong told the Hanoi Times.

General Secretary of the Vietnam Small and Medium Business Association To Hoai Nam added the National Assembly’s Resolution No.43 on socio-economic recovery was central in laying the groundwork for further support to businesses and people affected by the pandemic.

“Government’s supporting policies have opened the doors for businesses to return to the market, eventually leading to the economy’s recovery in general,” Nam said.

Meanwhile, Vice Director of the Central Institute of Economic Management Phan Duc Hieu stressed the necessity for the quick implementation of upcoming policies.

In the past months, Hanoi has set up a task force group to address business concerns during the pandemic. Director of the municipal Planning and Investment Do Anh Tuan said the focus would be on the implementation of supporting policies in terms of taxes, credit, land, and workforce.

In 2022, Hanoi is expected to allocate nearly VND2 trillion (US$87 million) in loans of preferential rates for poor households, SMEs, and cooperatives to resume business.