German businesses show optimism about Vietnam’s economy in the medium term and look forward to its recovery by 2022.

Inside Vinfast's factory. Photo: Pham Hung

The Association of German Chambers of Commerce and Industry (DIHK) revealed sentiment of German businesses in its world business outlook survey with Vietnam in focus, released on May 12.

According to the survey, while 46% had a positive view of the local economic development in 2020, 66% expects a significant improvement in 2021. One-third of survey participants think that the economy of Vietnam will recover in the first half of this year, and 30% says that the recovery will happen next year, in 2022.

“Vietnam will become a strategic investment destination in the process of restructuring the global and regional supply chain, a potential domestic market to attract international corporations,” stated the DIHK.

In this regard, “FDI enterprises, especially German businesses also show optimism about Vietnam's economy in the medium and long term. German business leaders maintain positive view with the economic expectation while looking forward to a recovered year of 2021 and 2022,” it noted.

For the upcoming 12 months, 55% rate their current business situation in Vietnam as good and 11% as poor. This poses a stark contrast with last year, as only 33% had a positive view of their situation in Vietnam.

Another positive note is that 47% of German companies in Vietnam intend to expand their activities in Vietnam and 50% assume an increase in employment in 2021/2022.

However, DIHK also revealed that “lack of qualified workers and low demand [both at 42%] are the greatest business challenges for German investors in Vietnam,” followed by economic policy, financing, legal certainty and infrastructure.

To ensure sustainable supply chain, 67% of German participants would diversify their supply chain by finding additional suppliers, changing in delivery routes or increasing their inventory.

Despite Covid-19 pandemic, the Deutsche Bank forecast Vietnam to achieve a growth rate of 7.5% this year, which came on the back of a positive growth of 2.9% last year amid severe Covid-19 impacts.  

Meanwhile, a World Bank study suggested the simultaneous implementation of the EVFTA and CPTPP would help Vietnam's GDP increase by up to 3.2% in the decade 2021-2030.