European companies’ confidence in the Vietnamese economy declined in the second quarter, but the S-shaped country is still among the top five global investment destinations for their companies, according to the latest Business Climate Index (BCI) published by the European Chamber of Commerce in Vietnam (EuroCham) showed last week.
The BCI fell below baseline to 48.0 in Q4 2022, down 14.2 points from three months ago and 25 points from the first quarter of the year.
While Vietnam’s economy grew more than 8% throughout 2022, this data comes on the back of continued global economic volatility due to a storm of factors, including a slowdown in global growth, interest rate hikes, continued inflation and bruised consumer confidence.
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The number of companies expecting economic stabilization or improvement in Q4 fell from 42% in Q3 to 27%, while the number of companies with a growing sense of pessimism doubled from 19% in Q3 to 38% in Q4.
“Things were decidedly less positive in the fourth quarter of 2022 than earlier this year,” said Alain Cany, President of EuroCham.
However, this should not be considered a cause for concern.
“In fact, Vietnam’s economic opportunities continue to outpace those of its regional and international peers. This is evident in the fact that so many EuroCham members view Vietnam as central to their global investment strategies,” said Cany.
According to the report, 41% of respondents said their company is shifting operations from China to Vietnam, up from 13% in the third quarter, while nearly 35% of companies ranked Vietnam among the top five global investment destinations for their company, with 12 % stated that Vietnam was their company’s top investment site globally.
However, the report also identified the top three regulatory barriers for foreign companies operating in Vietnam, including a lack of clarity regarding rules and regulations (51%), administrative difficulties (41%), and visa and work permit issues (30%). %).
Despite this, 58% were satisfied with policymakers’ attention to business needs when defining relevant policies.
In addition, BCI participants reported that the EU-Vietnam Free Trade Agreement (EVFTA) had a positive impact on the growth of their companies, their financial health through tariff reductions and the strength of their supply chains, according to Vietnamese news agency.
