Business confidence, outlook and expectations for the future among European businesses in Vietnam declined slightly in the first quarter of this year compared to the previous quarter, according to the 18th quarterly EuroCham Business Climate Index (BCI) survey conducted by the European Chamber of Commerce (EuroCham) in April.

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The European firms scored 78 on a 100-point scale when they graded the business environment in the Southeast Asian country, an improvement compared to the 75 of the preceding three months.

The overall score still expresses a relatively positive perception of the current and future business environment in the market, according to the survey released by EuroCham last Thursday.

The BCI is an indicator for economic activity in Vietnam, prepared on the basis of responses from over 700 European firms operating in the country.

It provides a regular barometer of the business sentiment among those companies, giving early signals of turning points in economic activity and tracking movements in business confidence over time.

EuroCham was established in 1998 and has since grown from 60 members to represent more than 750 European businesses, including many of the world's leading enterprises.

When compared with the previous quarter, the number of respondents asserting their current business situation as positive declined, as those who thought they were in “very poor” condition rose by two percent, while previous surveys had no mention of that view, the survey said.

Meanwhile, participants perceiving the situation as “good” shifted from 52 percent the previous quarter to 45 percent, while those with a “neutral” view remained largely unchanged at 31 percent.

In contrast, the number of participants which reported excellent conditions rose from five percent to 11 percent.

Regarding business outlook, the greater majority of respondents continued to perceive their business outlook as “positive,” but the number saw a decline from 62 percent the preceding quarter to 57 percent.

The second largest group of respondents was those with a “neutral” outlook, rising from 28 percent in the last quarter of 2014 to 30 percent in this first quarter.

The remaining participants were equally divided between “excellent” and “poor” conditions, at seven percent and two percent, virtually unchanged from the previous survey.

In their assessment of the macroeconomic outlook for Vietnam, 63 percent of respondents reported “stabilization and improvement,” a rise from the preceding quarter’s 59 percent.

Meanwhile, the participants expecting the situation “not to change” also shifted from 20 percent to 25 percent. However, the most noticeable decline was in the number of participants that expected “deterioration of the macroeconomic conditions,” which fell from 21 percent to 12 percent, according to the survey.

Regarding their expectations for inflation rates, most participants hope that over the next six months the market will see a slight reduction in inflation, from 5.78 percent to 5.25 percent.

With the projection on inflation, the greater majority, at 65 percent, reported that they believe inflation will have a slight impact on their business situation, 17 percent feared a significant impact and seven percent expect inflation to have no effect on them, whereas only one percent said that the inflation threatens their business.

When mentioning business strategy, especially headcount development, the largest group remains unchanged, with 48 percent saying that they are considering increasing “slightly” the number of employees, while the second largest group, at 32 percent, says that they expect to “maintain” the number of employees at the current level.

This trend also applied to investment plans in the medium term, where the largest group remains unchanged, with 41 percent saying that they have considered expanding their investment in Vietnam “slightly,” followed by the second largest group, at 35 percent, expecting to “maintain” their level of investment.

In terms of expected orders/revenue, the largest group, rising from 56 percent to 60 percent, said they eye a “slight increase,” while 14 percent said that they look forward to a “significant increase” or that that they wish to “maintain” the same level.

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