EuroCham announces higher BCI in Q3 as business confidence rebounds

The European Chamber of Commerce (EuroCham)’s Business Climate Index (BCI) in the third quarter of this year jumped 24 points to reach 57.5 – the highest score since the outbreak of the global COVID-19 pandemic.

European business leaders in Viet Nam were more positive about their own enterprises in the third quarter with 40 per cent describing their performance as either “Excellent” or “Good” – more than double the 18 per cent recorded in the previous three-month period, according to a report on this index released on November 26.

The fourth quarter looks to be even more promising, with 44 per cent predicting a strong end to 2020. Meanwhile, most companies are anticipating stabilisation in their headcount (65 per cent) and investment plans (57 per cent), with just under half (44 per cent) expecting to see an increase in their revenue and orders.

With businesses able to operate with far fewer restrictions and the EU-Vietnam Free Trade Agreement (EVFTA) entering into force in the third quarter, the confidence of European business leaders has seen a strong resurgence.

The BCI also asked EuroCham members about the impact of the EVFTA on their business and investment plans. One-third said that the agreement was an important part of their decision to invest in Viet Nam, with the top two factors predicted to drive growth being tariff reductions (33 per cent) and greater market access for investors (13 per cent).

“Despite a difficult 2020 for international trade, our data shows that Viet Nam’s swift and effective response to the global pandemic has paid dividends. European business leaders feel more positive both about their own enterprises and Viet Nam’s trade and investment environment, and report a sense of cautious optimism going into quarter four,” said Nicolas Audier, Chairman of EuroCham in Viet Nam.

“The implementation of the EVFTA in August has, no doubt, helped boost this growing confidence. Our data shows that falling tariffs and growing market access are important to our members, and will help to spur new foreign-direct investment from the EU in the future.”

In addition, Thue Quist Thomasen, CEO of YouGov Vietnam that conducted the BCI report, said: “Drilling down into the data, we can see some of the trends that underlie the jump in positive sentiment in more detail. In short, business leaders are reporting a sense of cautious optimism in their own companies, and this is driving confidence in Viet Nam’s macroeconomic prospects next quarter."

"In particular, the proportion of business leaders predicting an increase in their orders or revenue in the next three months has risen by 20 per cent – from 24 per cent in the second quarter to 44 per cent in the third quarter," Thomasen said.

Meanwhile, 23 per cent of business leaders expect to hire more staff in the next three months, compared to 14 per cent in the last BCI. Together, these signals point to a positive end to 2020, he said.

The BCI is a regular barometer of EuroCham members and their perceptions of the trade and investment environment. Each quarter, it tracks the performance of EuroCham’s member companies and their perceptions of the economic outlook in Viet Nam.

In the first quarter of 2020, when COVID-19 first hit international trade and investment, the BCI fell to 26 points. It saw a slight increase in the second quarter as Viet Nam became one of the global success stories of the pandemic.

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