the business outlook has seen significant improvement — File Photo

HCM CITY (Biz Hub) — Business confidence among European companies in Viet Nam continues to improve, according to Eurocham's 11th quarterly EuroCham Business Climate Index (BCI) survey released yesterday.

The Business Climate Index conducted in May rose to the midpoint, from 48 to 50 points, following three quarters that had registered below 50.

This is the second consecutive increase, which suggests that European companies were regaining trust in the Vietnamese market.

The key indicators were an increase in revenue and orders, and optimism about the overall economic outlook.

Despite positive signs, the BCI remains at 50, far below the highpoint of 79 in 2011, and the improvements over the last two quarters remain limited, with an increase of two points per quarter.

More than half of the businesses that took part in the survey are active in the services industry, a quarter in manufacturing, and the rest in trading and other activities.

In line with the last survey, there has been a continued increase in respondents assessing their current business situation as positive, from 40 per cent to 43 per cent.

The previous quarter saw a rise from 26 per cent to 40 per cent, and the current level reflects improved business sentiment.

Looking to the future, the business outlook has seen significant improvement, with members having positive expectations rising from 30 per cent to 43 per cent.

This development may be linked to the ongoing EU-Viet Nam FTA negotiations, the survey said.

Although business confidence has improved, 57 per cent of respondents assessed their outlook as either "neutral" or "negative".

Still, the survey found that reported investment appeared to be improving, and that more companies intended to have a significant increase in investment. This doubled from last quarter's 7 per cent to 13 per cent.

Overall, investment plans look more positive than they did a year ago, with 76 per cent of respondents either expecting to keep or increase their investment levels, compared to 72 per cent a year ago.

The number of respondents expecting to cut investments further declined to 19 per cent from last quarter's 24 per cent.

This again indicates a returning faith in Viet Nam's medium-term future, and shows that Government initiatives are inspiring increasing confidence and optimism.

When asked about their expected number of orders and revenue in the medium-term, 84 per cent of respondents said they would remain constant or would improve.

In addition, concerns about inflation are declining, with 65 per cent of companies expecting inflation to have limited or no impact on their business in the medium-term, compared to 55 per cent in the last quarter and up from 43 per cent a year ago.

Members were also asked to indicate what they think the rate of inflation will be, and the average came to 5.13 per cent.

This is very close to last quarter's estimate of 5.12 per cent and down half a percentage point on last year's 5.63 per cent.

Respondents' appreciation of the macroeconomic situation is also improving.

Whereas last quarter 57 per cent expected a further deterioration in conditions, and a staggering 72 per cent the quarter before, this has now fallen below the midpoint to 48 per cent.

In other words, 52 per cent of the respondents believe the economy will stabilise and improve in the future, something which has not been seen in the Business Climate Index since 2011. — VNS