Q2 Business Performance Expected to Be Better than Q1

A business survey showed that manufacturing and processing companies expected the Covid-19 pandemic would end soon and their business performance in the second quarter would be better than in the first quarter.

The business sector faced more difficulties in the first quarter of 2020 because of direct impacts of the Covid-19 epidemic. According to the latest report released by the General Statistics Office of Vietnam (GSO), in the first quarter of 2020, the country had 29,700 new companies with a total registered capital of VND351.4 trillion which hired 243,700 workers, up 4.4% in companies, down 6.4% in registered value and down 23.3% in jobs generated compared to the same period of 2019. The average registered capital of a newly established enterprise was VND11.8 billion, down 10.4% year on year. If VND552.4 trillion of investment fund added by 9,100 companies was counted, the total investment value into the economy was VND903.8 trillion in the first quarter, down 17.7% on year.

By sector, in the quarter, 426 new companies were involved in agriculture, forestry and fishery, up 6.2% year on year; 8,100 companies were engaged in industry and construction, up 4.2%; and 21,200 companies were registered in the service sector, up 4.5%. A sharp growth in new business entities was seen in wholesale, retail, vehicle repair, processing, manufacturing, consulting and designing fields.

As many as 18,600 companies temporarily suspended their operations in the first quarter, 26% more than a year earlier; and 12,200 companies terminated their operations or waited for dissolution procedures, down 20.6%. Of the sum, 2,629 enterprises had their business registration certificates revoked; 4,343 businesses posted notices of dissolution and 5,206 businesses waited for dissolution procedures with tax authorities.

In the March quarter, 4,100 companies completed dissolution procedures, as many as in the same period of 2019, including nearly 3,700 enterprises with a registered value of less than VND10 billion, down 1.3 %; and 62,000 companies with registered value of over VND100 billion, up 21.6%. The country witnessed 11,400 companies not active at their registered addresses, up 20.2% over the same period of last year.

The main cause of rising corporate closures was the specter of the Covid-19 pandemic. Revenue could not compensate for expenses like wages, bank loans and space rents. Aviation, tourism (accommodation, hotel and catering), education, garment and textile, footwear and woodwork were seriously and immediately affected by the plague. Besides, Covid-19 stilled manufacturing, trade, agriculture, retail and international capital flows. This context compelled businesses to rethink their directions and find opportunities in the epidemic threat to survive and prepare for recovery when the disease is over.

However, a business survey showed that manufacturing and processing companies expected the Covid-19 epidemic would end soon and their business performance in the second quarter would be better than in the first quarter.

According to the GSO, regarding business trends, the survey indicated that 20.9% of respondents said their business performance in the first quarter of 2020 was better than in the fourth quarter of 2019; 42% said it was more difficult; and 37.1% said their performance was stable.

As many as 38.8% of businesses surveyed said the trend in the second quarter will be better than in the first quarter; 25.9% forecast hardship; and 35.3% anticipated stable business. The State-owned business sector was most optimistic with 77.9% of respondents forecasting a better outlook in the second quarter of 2020. This ratio in private and foreign-invested sectors was 74% and 73.8%, respectively.

Moreover, new orders or export orders were also forecast to be better in the second quarter of 2020. 40.3% of respondents anticipated an increase in output; 22.8% forecasted a decrease; and 36.9% expected on stability. On orders, 36.7% hoped for an increase in orders; 22.8% expected a reduction; and 40.5% hoped for a stable inflow of orders. In addition, 30.7% planned to boost new export orders; 23.7% estimated to suffer a decrease; and 45.6% expected to be stable.

Another bright spot expected by businesses is that the Government is pushing a series of measures to remove obstacles in business operations. Measures include removing difficulties and facilitating access to capital, credit, finance, tax, commerce and electronic payment; and reducing administrative procedures and costs for businesses.

By Thu Ha, Vietnam Business Forum