81% of surveyed firms pessimistic about Vietnam economic outlook

Up to 81.4% of Vietnamese firms have a negative outlook on the country's economic conditions this year, according to a new survey by the Prime Minister's Private Economic Development Research Board.

The survey, submitted to Prime Minister Pham Minh Chinh on Thursday, featured 9,556 business respondents and showed that only 4.2% had a positive outlook on the economy, while 14.4% gave neutral opinions.

The biggest challenge facing the economy was a shortage of orders, according to 59.2% of respondents, followed by access to capital with 51.1%, administrative and legal procedures with 45.3%, and the risk of criminalizing business activities with 31.1%.

Businesses also pointed out that support from local authorities does not match their requirements, with 84% of respondents rating it ineffective.

In the remaining months of 2023, 82.3% of businesses plan to reduce, suspend, or stop operations. Among those, 20.5% plan to scale down slightly, 38.5% strongly, 12.4% will halt operations, and 10.9% will process dissolution.

Among the 7,333 businesses that plan to continue operations, 71.2% expect to have to streamline their workforces, including 22.2% that will cut at least half their staff, 24% with a reduction of 21-50%, and 25% with a cut of 5-20%. Only 4% want to expand their teams by 5-20%, and 1.6% with further growth.

Proposed solutions

The unit making the survey proposed four solutions related to reduced costs, loan access, business environment, and market access.

It suggested the government continue with support policies similar to the Covid-19 era, such as an extension of a two percentage point reduction on the value-added tax until the end of 2025, delays or reductions of payments related to workers’ social insurance and labor unions, new personal income tax formula, quicker tax refunds for businesses, and lower the corporate income tax down to 5-10% for export firms.

Regarding loans, the board recommended the government form preferential packages for businesses in key manufacturing sectors, especially small and medium enterprises, and cancel credit limits for realty firms related to social housing, hospitals, schools, and infrastructure. It also said the government should allow commercial banks to buy back bonds that are about to mature and reduce interest rates for leasing and purchasing social housing products.

In terms of the business environment, the board said the government should complete investigations and the processing of major crimes to help firms focus more on operations, and refrain from conducting more than one inspection per firm per year.

It should also allow officials to implement support policies without fear of punishment, and let district-level fire departments check and approve factories of VND200 billion ($8.52 million) or less to reduce administrative procedures.

To help businesses facing a shortage of orders, the board suggested the government boost economic diplomacy and seek new markets, especially for footwear, apparel, textile, and wooden products.

At the opening session of the National Assembly in Hanoi on May 22, Vu Hong Thanh, head of the legislative body's Economic Committee, said the country's economic growth must reach at least 7.5% in each of the second, third, and fourth quarters to meet the annual target after growth slowed to 3.32% in the first quarter.

The prolonged global slowdown together with the credit crunch and other problems in the Vietnamese economy may prevent Vietnam from hitting its 2023 GDP growth target of 6.5%, he said.

A report by the committee shows that in the first four months of the year, nearly 79,000 enterprises were registered as new businesses or had reopened, meaning about 19,700 each month. However, around 19,200 enterprises left the market every month in the period. Many businesses had to sell stakes or assets at very low prices to stay afloat, and many of those deals involved foreign buyers.

Vietnam posted economic growth of 3.32% in the first quarter of 2023 compared to a year earlier. The first quarter’s performance comes amid current global economic headwinds, with the U.S. and European banking sectors facing a crisis of confidence, and significantly lower than the 5.92% growth rate reported in the last quarter of 2022.