Businesses Expect 3-5% Economic Growth in 2020

Despite being affected by the COVID-19 pandemic, some industries continue to see more businesses than others, e.g. construction, building materials, real estate (23.9%), finance (11.6%), food and drink (10.9%%) and electricity (6.3%).

This information is found in PROFIT500 Rankings - listing the 500 most profitable companies in Vietnam in 2020.

Effort to keep customers

Many Vietnamese businesses, even giants in the market, have been "infested" by the COVID-19 pandemic. According to the survey by Vietnam Report Joint Stock Company, up to 60% of companies said that their revenue in the first six months of 2020 decreased from a year earlier, with nearly 15% experiencing a sharp decline. Similarly, the profitability was not very satisfactory when 54% said that their pre-tax profit slipped from the same period in 2019, with 31% suffering a sharp slump, even a serious loss.

Being aware of difficulties caused by the pandemic impact and world economic - political instability, many companies revised their 2020 business plans to match reality. This is clearly expressed when 77.1% of respondents said that they completed over 50% of their 2020 revenue plan, with 36.1% fulfilling over 80% of the full-year plan. Regarding profit result in 2020, as of August 2020, 68.9% of companies joining the survey said that they had completed over 50% of the yearly plan, with 31.1% fulfilling over 80%.

To cope with the COVID-19 pandemic, 86.7% of respondents joining the survey by Vietnam Report said that they tried to maintain loyal customers; 66.7% enhanced strong risk management and financial management; 65.0% took measures to cut costs; 53.3% looked for markets for new products and services; and 50.1% changed their sales plans and marketing plans.

When the market shrank and it was hard for them to reach new customers, most companies had to opt for a safer and more feasible approach. Instead of looking for potential customers or expanding the market, 86.7% of businesses sought to retain their existing loyal customer base, this was considered a right and wise decision that helped them overcome the current tough time.

On the other hand, unpredictable events can occur at any time. Taking coronavirus as an example, it was unimaginable for it to spread at breakneck speed and produce very dangerous strains, as it has. Therefore, up to 66.7% of companies responded that they decided to promote risk management and financial management. Objectively speaking, not only large corporations or certain industries such as banks need a risk management system, but it is a matter for every business regardless of their size. An effective risk management process helps achieve set goals and have response options if needed.

In addition, 65% of respondents said that they had cut costs by reducing personnel costs, administrative costs, production costs, and marketing costs. Cost is not a new matter but it is called when they seriously suffer very heavy impacts caused by the COVID-19 pandemic.

Cautious with business prospects

When asked about barriers and challenges likely to affect profitability in the last months of the year, most companies shared the same concern about the risk of COVID-19 outbreak: Pandemic return (98.3%) and unstable economic growth (71.2%). Vietnam is controlling the COVID-19 pandemic well. However, concerns about further outbreaks still exist. Until the vaccine is successfully found and widely produced, the pandemic is not completely extinguished. Vietnam cannot relax and be subjective.

Because of this, businesses become more cautious in assessing their business prospects in 2020. Accordingly, 54.1% of respondents expressed optimism about the prospect of increasing revenue and 49.1% are optimistic about profitability in 2020. This number is very modest relative to revenue and profit prospects in the report surveyed by Vietnam Report in September 2019, where 82% expected revenue growth and 79% thought that their net would grow over 2018. Thus, it can be seen that businesses are basing on the current economic context of Vietnam to make growth forecasts in 2020.

On growth prospects in the next 1-2 years, pharmaceutical/health sectors ranked first with 61.7% of responses (compared to their No. 6 place in the 2019 survey). The runner-up was the information technology/telecom industry with 50.1% of responses (ranked first in the 2019 survey), followed by the finance/banking sector with 39.8% of responses, two grades higher than in 2019.

Surveyed companies also focused on digital transformation: corporate governance digitization (65.0%), digital distribution, marketing and sale channels (58.3%) and spending for technology innovation and technology application (56.7%). In addition, surveyed businesses also stated they had strengthened cooperation with partners to bring applied technology into customer service, marketing and sales channels, as well as support services like record verification, electronic signature and facial recognition.

Given policy support from the government and efforts of the business community, 25.1% of respondents anticipated an economic growth of below 3% in 2020 and 61.7% thought that the growth would be 3-5%. Following the adoption and enforcement of the EU - Vietnam Free Trade Agreement (EVFTA) and the EU - Vietnam Investment Protection Agreement (EVIPA), good pandemic control and stable business investment environment, Vietnam is forecast to be a place for strong FDI inflows in the near future. Vietnamese businesses should take advantage of the opportunity to catch the FDI waves.

By Lan Anh, Vietnam Business Forum