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Grant Thornton: Vietnamese businesses positive about 2019 economy

Released at: 13:58, 28/02/2019

Grant Thornton: Vietnamese businesses positive about 2019 economy

Photo: Viet Tuan (VET)

Optimism on economic prospects found in Grant Thornton's International Business Report despite global concerns.

by Hong Nhung

Local businesses are optimistic about this year’s economic prospects despite the global economic uncertainty, the latest International Business Report (IBR) from Grant Thornton found.

The global economic cycle has peaked and businesses face a more downbeat outlook in 2019. With risks increasing, how can businesses continue to achieve growth and thrive in the year ahead?

It’s not all bad news and despite the spike in uncertainty, over 60 per cent of respondents were either optimistic or very optimistic about the future. This is reflected in export expectations with only 11 per cent expecting a decrease and 84 per cent of leaders expecting revenues to either stay the same or increase. Of the companies in Vietnam participating in the survey, 62 per cent were more optimistic about growth prospects for this year - 5 per cent higher than the average for Asia-Pacific.

Among the 5,000 mid-market business leaders Grant Thornton interviewed as part of the IBR’s global economic outlook, global optimism sits at net 39 per cent, a fall of 15 percentage points (ppts) from net 54 per cent in the second quarter of 2018. This is the weakest optimism score seen since the fourth quarter of 2016.

“While global financial markets are increasingly volatile, business leaders in the real economy remain optimistic because global GDP is forecast to continue growing and they know their business will grow with it,” said Mr. Nguyen Chi Trung, CEO and Managing Partner of Grant Thornton Vietnam. “Despite increasing downside risk, economic fundamentals remain strong and opportunities exist.”

Traditionally, in times of economic uncertainty, additional expenditure and investment seems counter-intuitive and many businesses tend to shore up their operations and significantly reduce or cease investment. However, this is a time when investing in capabilities and infrastructure can pay dividends and, when the economy turns, prudent businesses can react with speed to take advantage.

Vietnam had record levels of FDI and high domestic investment last year and this looks set to continue this year.

Vietnamese companies also were optimistic in a number of areas, with 69 per cent expecting to see higher revenue growth and 5 per cent expecting higher profitability in 2019. In line with Vietnam’s export growth projections, 49 per cent of companies interviewed expect to see higher export earnings this year compared to last.

On the less positive side, 55 per cent of those surveyed in Vietnam still consider red tape and bureaucracy a significant constraint to growth, while 54 per cent believe labor costs could become a significant constraint to growth if productivity growth does not keep pace with wage increases.

“As the economic cycle cools, it’s clear that business globally won’t have it as good as they did in 2018,” said Mr. Kenneth Michael Atkinson, Executive Chairman of Grant Thornton Vietnam. “However, with the IMF predicting global economic growth of 3.5 per cent in 2019, there is no clear consensus on the probability or timing of a global recession.”

“What we are seeing is a return to normality, with more balanced and sustainable growth for economies. However, in Asia-Pacific there is, I believe, a clear consensus that growth will continue at relatively high levels, exceeding by a significant percentage the global average, with Vietnam showing one of the highest GDP growth figures in 2019.”

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