Business confidence index rises

Manufacturing super light bags for pupils in Ladoda Production Service Trading Leather Products Co. — VNA/VNS photo Tran Viet

HA NOI — The business confidence index (BCI) rebounded in the third quarter this year after it increased three points over the second quarter and 37 points against the same period in 2008.

"This survey attracted the participation of 262 companies from 11 primary sectors and industries in Viet Nam," said a representative from WVB FISL. "More than 70 per cent of the companies are small- and medium-sized enterprises."

With respect to current economic conditions, about 70 per cent of the participants thought overall economic conditions had improved compared to one year ago. About 25 per cent of the participants agreed that there was no change with the current economic conditions, and 4.2 per cent said that current economy conditions had not improved.

About 84.35 per cent of the participants said they believed the economy would continue to improve and 15.65 per cent said they believed there would be no change.

Optimistically, about 72 per cent of the individuals questioned said they believed their enterprises' profits would likely increase during the next 12 months.

As many as 60 per cent of the participants said they expected their employment and investments in fixed assets to increase.

During the last quarter, the number of businesses that were concerned about their revenues and profits was up 0.06 per cent and 1.96 per cent, respectively.

The survey also showed that many domestic businesses were still concerned about inflation and fluctuations in the exchange rate between the US dollar and Vietnamese dong.

Most participants surveyed said they believed foreign investors would focus on four major areas including real estate, consumer product manufacturing, information technology, and mining.

Nearly 20 per cent of them believed that foreign investors would pour money into the information and technology sectors, while 31.27 per cent said the real estate sector would receive more investments.

The survey also found that many businesses believe that the tourism, footwear, garment and pharmaceutical sectors will continue to gain momentum and receive increased investments in the future.

The quarterly survey was conducted by the Viet Nam World Vest Base Financial Intelligence Services (WVB FISL) and PetroVietnam Finance Investment and Consultancy Company (PVFC Invest). — VNS

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ADB ups stable Vietnam’s economic outlook

The Asian Development Bank has raised Vietnam’s GDP growth forecast for this year and next year by 0.2 percent to 6.7 percent and 7 percent due to the country’s efforts to maintain economic stability.

Vietnam has successfully shifted from the strong fiscal and monetary stimulus to tackle the global recession last year to a more balanced policy to stabilize financial and economic conditions, it says in its annual flagship publication, the Asian Development Outlook Update, which was released in Hanoi Tuesday.

The steps taken by the government to stabilize the economy have contributed to an improvement in the economic growth: GDP grew by 6.2 percent in the first half of this year compared to 3.9 percent in the same period last year.

Policy tightening and a good rice harvest have helped pull back inflation from 9.5 percent year on year in March to 8.2 percent in July and August.

The trade deficit has narrowed from $8.1 billion in July-December 2009 to an estimated $3.8 billion in the first half and the current account deficit from $8 billion to $2.7 billion.

The current account deficit, as a ratio to GDP, is forecast to narrow from 7.5 percent in 2010 to 5.4 percent in 2011 due to the shrinking trade deficit and increasing remittances and tourist arrivals.

The balance of payments situation has been improving due to higher foreign direct investment.

The bank is optimistic about the inflation situation since the country’s economy and world oil and commodities prices have been stable. It has cut down its earlier estimation of 10 percent inflation this year to 8.5 percent and from 8 percent to 7.5 percent next year.

However, it foresees a risk to the economy if there is a premature easing of monetary or fiscal policies or a perception of looser policy by financial markets and domestic investors.

“An early easing, or the perception of a relaxation, could derail the macroeconomic stabilization efforts, putting inflation on an upward trajectory and pressure on external accounts.”

So the authorities should maintain a firm and consistent policy stance, and communicate such a position effectively to the market until inflation is clearly on a downward track and foreign reserves increase, the bank warns. The other major challenge is to raise the efficiency of the economy and reduce supply-side constraints through structural reforms.

Ayumi Konishi, ADB’s country managing director for Vietnam, said at the release that the government should be very cautious about maintaining macroeconomic stability and effectively inform the people about the policies while promoting further reform.

The most important factor is providing quality and up-to-date information to businesses and potential investors, he added.

Last year, it ratified a total credit of $16.1 billion for the country’s loans, non-refundable and technical assistance projects.

The Asian Development Outlook and other ADB reports analyze the economic conditions and prospects in Asia and the Pacific and are issued every April and September.

Vietnam will host the ADB’s 44th annual summit in Hanoi next May.

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