The business confidence index (BCI) in the second quarter reached just 88 points, down 21 points against the previous quarter, representing the biggest drop since the index was first adopted in Vietnam in 2008.
WVB Vietnam Financial Intelligence Services (WVB FISL) surveyed 127 businesses in 11 primary sectors and industries in Vietnam between May 18 and the beginning of July. Of those that responded, 78 percent were small – and medium-sized companies.
Most businesses expressed a lack of confidence in the country's economic recovery this year. Respondents said more time is needed for the Government's macroeconomic policies to bear fruit and restore business confidence.
Just 38 percent of firms questioned said that they thought the overall economic outlook had improved compared to a year ago, while 12 percent thought it had worsened. However, 53 percent of companies were confident the economy would improve over the next 12 months, while 10 percent predicted a dismal 2012.
Despite the bleak predictions, 44 percent of enterprises said they planned to increase their work force, while 33 percent said they would invest more in fixed assets over the next 12 months.
A mere 20 percent of businesses were confident sales revenues would increase over the next year – a 47.8 percent decrease compared to the previous quarter. Meanwhile, 41 percent thought their profits would increase in 2012 – a 23 percent decline over the first quarter.
The WVB FISL also asked businesses to comment on hot issues, such as wage rises to offset the impact of rising inflation, Government measures to halt the unofficial interest rate war among banks, sluggish stock market, Vietnam's trade balance and inflation.
In response, 51 percent of enterprises said pay rises would depend on business results, while 71 percent said the central bank should impose caps on both deposit and lending rates.
Only 23 percent said the poorly performing stock market had affected their business, while 45 percent thought Vietnam's trade deficit would continue to increase. Meanwhile, 72 percent expected annual inflation this year to reach 15-20 percent.