German Businesses Optimistic about Vietnam's Economy

While 46% of German businesses had a positive view of Vietnam’s economic development in 2020, 66% expected a significant improvement in 2021. One-third thought that the economy of Vietnam will recover in the first half of this year, 30% said that the recovery will happen in 2022.

This is the result shown in the survey by the network of German Chambers of Commerce Abroad (AHKs).

According to AHK, the pandemic has affected local and German businesses and caused a decline in their business performance. Factors such as travel restrictions, less consumer demand for products and services, the cancellation of trade fairs and events still hurt the German companies in Vietnam.

In the sustainable supply chain, 67% of German participants would diversify their supply chain by finding additional suppliers, changing delivery routes, or increasing their inventory.

Despite this, German businesses look forward to a positive economic climate and outlook for Vietnam. Despite the COVID-19 pandemic, Vietnam recorded economic growth of 2.9% in 2020 and is expected to achieve a growth rate of 7.5% this year. The simultaneous implementation of the EVFTA and CPTPP Agreement will help Vietnam's GDP increase by up to 3.2% in the decade 2021-2030. Vietnam will become a strategic investment destination in the process of restructuring the global and regional supply chain, a potential domestic market to attract international corporations.

Besides, Vietnam is still one of the countries with the fastest economic growth in Southeast Asia. FDI enterprises, especially German businesses also show optimism about Vietnam's economy in the medium and long term. German business leaders in Vietnam maintain a positive view of both the larger economy and their situation in Vietnam and they look forward to the recovery year of 2021 and 2022.

Mr. Marko Walde, Chief Representative of AHK Vietnam said, it is obvious that these results show the Vietnamese government has taken a decisive and forceful action against the impact of the pandemic. These measures should be taken as fast as possible to counter the economic impact of the coronavirus, in order to bring the economy back onto a growth path as quickly as possible.

Moreover, the Vietnamese government creates the most favorable conditions for foreign investors and businesses. The country has been implementing a number of activities and effective methods in order to achieve the dual objectives: promoting socio-economic development and effectively preventing pandemic in the “new normal” condition of Vietnam.

With a positive view of the business situation and expectations in Vietnam, German businesses operating in Vietnam assess both their own business situation and future business expectations significantly better than in 2020.

55% rate their current business situation in Vietnam as good and 11% as poor. While in 2020 only 36% had a positive view of their situation in Vietnam. The balance points increase from 13 points to 44 points. The great increase in business expectations is really surprising. While the positive ratings rise from 36 to 55%, the number of negative ratings fall from 23 to 11%.

Besides, 47% of German companies in Vietnam intend to expand their activities in Vietnam and 50% assume an increase in employment in 2021/2022.

Although quite optimistic about the business situation in Vietnam, according to AHK, lack of qualified workers and low demand are the greatest business challenges for German investors in Vietnam.

Other factors that might affect German businesses in Vietnam are financing, legal certainty and infrastructure. 

By Thu Ha, Vietnam Business Forum