Local business sentiment falls

Thursday, Jul 25, 2013 07:54

Visitors purchase duty-free goods at Moc Bai Bordergate Economic Zone in southern Tay Ninh Province. Optimism has fallen among local businesses due to the ongoing economic turmoil. — VNA/VNS Photo Hoang Hai
HCM CITY (Biz Hub) — Business optimism in Viet Nam dropped by a third in the second quarter to 14 per cent, one of the lowest rates in the region, according to a quarterly global business survey by Grant Thornton.

Kenneth Atkinson, managing partner of Grant Thornton Vietnam, said: "The figures make interesting reading. They reflect business owners' concerns over their current business situation but with some optimism for growth in the economy over the next 12 months.

"In addition to the numbers reported here, there are still constraints on growth due to the cost and availability of finance and red tape.

"These are not new and are constantly being brought to the attention of the Government.

"However, with the recent growth in credit, there is some causes for optimism on one of the issues but interest costs do remain relatively high."

Though optimism is falling, expectations of revenue growth and profitability were stable at 86 per cent and 88 per cent respectively.

But 64 per cent of respondents were either neutral or expected a better performance by the economy over the next 12 months.

There has been a steep fall in the number expecting to increase R&D spending — from 40 per cent to 20 per cent.

There was a significant increase —from 36 per cent to 64 per cent — in those stating that cost of finance was a constraint on their business.

The International Business Report, polling more than 3,200 businesses in 44 economies and released on July 23, also showed a dramatic reversal of fortunes for business leaders in the world's two largest economies.

US, China divergent

In the US, one of Viet Nam's major export markets, business optimism shot up to 55 per cent from 31 per cent in Q1, the highest level since 2005.

This improving sentiment flowed through to US business growth expectations: 59 per cent expected to see revenues climb over the next 12 months, up from 46 per cent in Q1, and 48 per cent expected profits to grow, up from 42 per cent.

On the other hand, in China, business optimism slumped to just 4 per cent from 25 per cent, the lowest level since 2006 (when businesses were first interviewed in China for IBR).

Chinese businesses are less confident about increasing revenues (down from 72 per cent to 60 per cent), exports (29 per cent to 15 per cent), or profitability (69 per cent to 42 per cent) over the next 12 months.

Ed Nusbaum, global CEO of Grant Thornton, said: "The divergence in the data is relative in that China is coming off a big high and the US off a deep low.

"Ultimately global growth prospects would be best served by a strengthening of both markets, but broader macroeconomic trends are feeding into business sentiment." he said. —VNS

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