Confidence of European business leaders in Vietnam continues to stabilize despite uncertain times, according to the latest Business Climate Index (BCI) from the European Chamber of Commerce (EuroCham) and Decision Lab. 

Source: EuroCham Business Climate Index Survey, Q2 2020

The overall BCI score saw a slight increase over the last three months, according to the Q2 report. It rose from 27% in the first quarter (Q1) to 34% in April, and remained stable into Q2. This confirms that confidence is returning to the market after a fall during the initial emergence of Covid-19, the report wrote.

However, the BCI also shows that European business leaders continue to feel the impact of the global pandemic, and remain cautious about the prospects of their enterprises.

The latest BCI reveals that European enterprises fared better in Q2 than first anticipated during the peak time of the Covid-19 pandemic. In Q1, just one-in-ten EuroCham members had foreseen a short-term improvement in their performance. However, businesses outperformed these predictions, with 24% describing their business situation as “good” or “excellent” in Q2.

Source: EuroCham Business Climate Index Survey, Q2 2020

Around a quarter of EuroCham members predicted a rise in orders in Q3. Meanwhile, 28% of respondents estimated a similar level of orders to Q2, and this optimistic sentiment should help drive growth in the Vietnam’s business environment for Q3.

Source: EuroCham Business Climate Index Survey, Q2 2020

Despite these positive signals, companies continue to feel the impact of Covid-19 on their business operations, with 44% predicting a drop in headcount in the next quarter. Around 46% of European businesses plan to keep the same headcount. Meanwhile, 45% of them are planning to reduce their future investment plan.

Source: EuroCham Business Climate Index Survey, Q2 2020

“Despite the stormy waters of a global pandemic, our data shows that the Vietnamese government’s swift and effective response to Covid-19 has successfully steadied the ship here in Vietnam,” Nicolas Audier, chairman of EuroCham Vietnam, said.

“While the confidence of our member companies has improved and stabilized, business leaders continue to feel the effects of this virus and remain cautious about the future  of their business operations,” added Audier.

The BCI also found that international travel restrictions are having an impact on European enterprises in Vietnam and 41% of respondents predicted the significantly impact on business performance if the restrictions keep in place in the future.

“Looking ahead, global trade will remain unpredictable for some time. But we can be confident that European business will be one of the factors driving long-term economic growth in Vietnam, now that the EU-Vietnam Free Trade Agreement has entered into force,” Audier said.