Business Optimism Index
Vietnam
Quarter 2 2015
Businesses expect growth
to stay the course
Outlook for Q2 2015
- Key Highlights
Business confidence levels seem to be in line with
the performance of the economy, and will continue
the upward trend in Q2 2015. The overall index
improved slightly from 24% to 27%.
4 out of the 6 optimism parameters have risen
in Q2 2015, led by Employment with the
largest percentage increase. Volume of Sales
and Net Profit show the most optimism, while
declines are observed for Selling Price and
New Orders.
Services grew the most with an increase of 13
percentage points, while other sectors such as
Mining, Construction and Wholesale remain soft.
The latest Business Optimism Index (BOI) extends the
gains in the previous quarter with marginal improvement
of 3 percentage points, to 27% for Q2 2015. Close
to one third of respondents anticipate better business
conditions in the coming quarter (30%), although the
majority expect the same or no change (65%). Outlook
on Sales and Net Profit is hovering strong at 40%, the
highest among the optimism parameters. Employment
benefited from the post Tet Holiday recruitment season,
with a 10-percentage point jump.
Changes in BOI correspond with the broader movement
of the economy, where GDP grew 6.3% y-o-y in Q1.
The main engine driving the economy is Manufacturing,
which expanded 9.5% y-o-y in Q1 compared 7.3%
the same period last year. Agriculture-Forestry-Fishing
(2.1%) and Services (5.82%) reported slightly lower
growth rates last quarter compared to Q1 2014 (2.4%
and 5.95% respectively), with exception of the Trade
sub-sector which saw clear improvement from 5.6% to
7.1% this year.
When we look at the economic fundamentals, average
inflation is still manageably low at 0.74% y-o-y. After
two months of negative inflation, price levels finally
eased upwards by 0.15% m-o-m in March, mainly due
to the seasonal effects of Tet. More importantly, real
consumption in Q1 2015 has shown impressive recovery
with 9.1% growth y-o-y, compared to 5.1% in Q1 2014.
Strong domestic demand in a low-inflation environment,
with supportive monetary policies by the government,
will continue to bode well for business optimism.
Overall growth in total investment increased from
8.8% for Q1 last year to 9.1% this year. Foreign direct
investment (FDI) is a clear winner, with a sharp spike
from 8.2% to 10.7%. Total FDI volumes reached USD
3 billion in Q1 2015 or 7% y-o-y. The trade balance
is currently in deficit at USD 1.8 billion, with USD
35.7 billion y-t-d export revenue (6.9% y-o-y growth)
and USD 37.5 billion y-t-d import revenue (16.3%
y-o-y growth). Export momentum may continue with
better than expected recovery in the US, the biggest
export market for Vietnam. Thanks to stable FDI and
remittance inflows, the balance of payments is estimated
to be in surplus of USD 2.8 billion.
Business Optimism Index
Vietnam
Quarter 2 2015
Volum e of s al es
Marginal improvement from 36% last quarter to
40% this quarter, but a few steps back from Q4 level
of 67%.
Service sector soared from 26% last quarter to
49% this quarter (+23 percentage points), followed
by Manufacturing (+9). Mining and Construction
sectors each dropped by 10 percentage points.
N e t pr o f i t
Changes in Net Profit correspond closely with Volume
of Sales. Growth is slight from 36% last quarter to
41% this quarter.
Service sector grew the most from 26% to 55% this
quarter, an almost twofold gain (+29 percentage
points). Conversely, Mining dropped the most (-9) to
merely 19% this quarter, followed by Construction
and Finance-Insurance-Real Estate (-5 each).
S el l i n g p ri ce
Selling Price is one of the two parameters that
registered a decline in optimism, from 12% to 7%.
Most respondents (84%) expect their selling prices to
remain unchanged throughout Q2.
Mining and Construction sectors dropped considerably
by 11-13 percentage points. It is interesting to note
that Transportation-Communication-Utilities
is
the only sector to show higher optimism, probably
due to the increase of electricity tariffs that will be
effective soon.
Business Optimism Index
Vietnam
Quarter 2 2015
N ew O rd ers
Besides Selling Price, New Orders is the other
parameter that retreated slightly from 36% last
quarter to 34% this quarter. Still, more than a third
of all respondents expect their orders to increase,
while only 4% see a decline in bookings.
There are sharp variations within the sectors.
Manufacturing is the most optimistic (+12
percentage points) followed by Services (+8).
However, Wholesale experienced a sizeable drop
(-19) along with Mining (-11).
i n v e n t o ry l e v e l s
Growth is observed from 16% last quarter to 20% this
quarter. Nonetheless the majority of respondents (65%)
do not expect changes to their existing inventory.
Mining and Manufacturing sectors face the largest
growth of about 5 percentage points. The latter has
the highest ratio of respondents (31%) planning
to the increase their stock levels in Q2, possibly in
tandem with the rise of new orders anticipated for
Manufacturing (in earlier chart).
E m p l oy m en t
Given the perceived weakness in Selling Price and
New Orders, it might seem curious at first glance to
see Employment rise from 5% last quarter to 15% this
quarter. Payroll size may have seasonally increased on
the wave of the Tet festivities. Growing expectations
for Sales and Net Profit could also have made hiring
decisions easier.
From the survey results, all sectors show increase in this
parameter except Mining (-5 percentage points), with the
largest for Manufacturing (+15). This is not surprising,
given its strong showing in the other parameters.
Business Optimism Index
Vietnam
Quarter 2 2015
Business Optimism Index (BOI) Report
The Business Optimism Index (BOI) report is a measure of business confidence in the economy. Released quarterly,
it measures the pulse of the business community and is one of the most effective ways to track how the business
community perceives the business environment, and where they think it is going. Over time, this quarterly survey has
emerged as a leading indicator of turning points in economic activity in countries which it is published.
Methodology
For the purpose of conducting the survey, a sample is randomly selected from D&B database, consisting of companies
belonging to the following sectors including Agriculture, Construction, Electric, Finance, Manufacturing, Mining,
Services, Transportation, and Wholesalers.
All the respondents in the survey are asked six standard questions regarding their expectations as to whether the
following critical parameters pertaining to their respective companies will register an increase, decline or show no
change in the ensuing quarter as compared to the same quarter in the prior year: Volume of Sales, Net Profits, Selling
Prices, New Orders, Inventory Levels, and Employees. The individual indices are then calculated by subtracting the
percentage of respondents expecting decreases from those expecting increases. Unless otherwise stated, increases and
decreases in indices represent changes from the previous quarter.
Analysis and Commentary by
Assoc. Prof. Dr. Nguyen Minh Ha, Dean of Post Graduate School, HCMC Open University, Vietnam.
About Dun & Bradstreet® (D&B)
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For more information, please visit www.dnbvietnam.com, or email us at [email protected].
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Business Optimism Index
Vietnam
Quarter 2 2015
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