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Vietnam business confidence dips

Publication Date : 20-04-2012

 

Vietnam's business confidence slumped in the first quarter despite a sharp reduction in the trade deficit, according to a report by auditing and consulting firm Grant Thornton.

The confidence rate fell all the way to 6 per cent from 34 per cent in the fourth quarter last year, according to the Grant Thornton International Business Report, a quarterly survey of 3,000 businesses in 40 countries.

"Lender support, cost of finance, lack of skilled labour, access to finance, and red tape continue to be the major hurdles to improving confidence in Vietnam," Ken Atkinson, managing partner of Grant Thornton Vietnam, said.

"It is disappointing to see that the trend in Vietnam does not match the positive uplift in confidence around the world.

"However, Government policies appear to be working with a steady decline in inflation, a reduced trade deficit, and a stable currency. This together with the likely decline in interest rates should help rebuild business confidence in the second quarter and beyond."

The Asia Pacific region saw an upward move of 11 per cent, from – 9 per cent to 2 per cent with Thai confidence rising to 8 per cent from – 52 per cent following the recovery from floods.

The improvement is most apparent in the G7 economies where business optimism rose by 28 percentage points, climbing to 16 per cent from the previous quarter's 12.

The increase in optimism in the US, from just 1 to 46 per cent, is a major factor. Businesses in Japan (-53 per cent) and Europe (-4 per cent) remain pessimistic, but both saw improvements over the last quarter.

However, looking back at results over the past 12 months tells a more sobering story. This time last year, optimism in the G7 economies stood at 27 per cent, 11 percentage points higher than this year's Q1.

Indeed, only Japan and the US have levels of business optimism recovered to where they were in Q1 last year.

Business optimism increased over the last three months driven by improved revenue and demand prospects, but businesses still remain less optimistic than they were this time last year, underscoring, according to the report, the fragile state of the global economic recovery.

"There is good news in that the outlook of many businesses has improved over the past three months, but global growth prospects remain delicately balanced.

"The comparison with this time last year shows how difficult the last 12 months have been, and how much further we have to go," Ed Nusbaum, CEO of Grant Thornton International, said.

 

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