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Epidemic only a short-term dampener, VN story remains intact: survey

Though Vietnam’s economy will suffer in the short term from coronavirus, the country’s drive to integrate into the global economy will continue to create plenty of new opportunities for trade and investment in the long run.

 

 

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Noi Bai International Airport is not as crowded as usual due to the outbreak. Viet Nam’s aviation market is suffering heavily from the epidemic.

 

 

The recent Annual Viet Nam Business Community Sentiment Index showed a huge drop in overall business confidence in Viet Nam for 2020 compared to last year due to the epidemic originating in China.

Ralf Matthaes, managing director of Infocus Mekong Research, said: “I have been living in Viet Nam for over 26 years and have never seen such a huge plummet in overall confidence, not even during the 2010-2011 real estate bubble burst.”

Frederick Burke, managing partner of Baker Mckenzie law firm and a veteran of WTO Accession and Bilateral Trade in Viet Nam, said however that the country’s integration into the global economy through free trade agreements would continue to create new opportunities for trade and investment over the years.

This year, there would be challenges for many businesses that might not be strong enough to withstand the shocks to the supply chain and credit availability, he warned.

“The tourism industry was the first to feel it, but even manufacturing for export is starting to feel the pain as imported components from China are getting held up in China’s shutdown.”

“Resiliency in supply chains has already become a theme and now it’s front and centre.”

Matthaes said: “This year will certainly dampen short-term gains for Viet Nam, especially in the consumer-based sectors, as consumers proceed with caution.

“However, as one of the most optimistic, resourceful and resilient peoples in Asia, this should only be a blip on Viet Nam’s overall economic trajectory.

“Coronavirus will not derail Viet Nam’s amazing rise to the top of the Asian economic food chain.”

Last year was a positive one in Viet Nam for business with 6.5 per cent GDP growth, record growth in exports and foreign direct investment and inflation being controlled at 3.5 per cent, he said.

Chris Hunt, manager director of HCM City Securities Corporation (HSC), said: “It is still early days living with the new strain of COVID-19 virus.

“As this is a new virus, timings are hard to forecast, but based on SARS and available information on both new cases and actual severity, we would be hopeful that much economic activity will be returning to normal by the end of 2020.”

It’s important to note not every sector will be impacted equally, some more so than others.

Stephen Wyatt, country head of property consultancy JLL Viet Nam, said: “Early indications suggest the hotel and hospitality, retail and F&B sectors are among the hardest hit.

“It remains to be seen how severe and how long the virus situation will last, and this means that some real estate developers may need to find additional funding or consider joint-venture partners.

“History suggests that after similar events business confidence rebounds quickly, so we believe this will result in a positive impact on the market in the longer term.”

Businesses with heavy reliance on China will obviously feel the impact, many severely.

The daily virus warnings from the Ministry of Health have made Vietnamese consumers apprehensive, deadening demand.

Online shopping

The big winners in 2020 will be online shopping, delivery services, the automotive industry, packaged foods and, possibly, homecare products, as consumers spend more time at home and less time in public places.

Though online shopping was only worth around 5 per cent of retail sales last year, 76 per cent of all consumers have bought online in the last three months and it is growing at above 20 per cent annually.

With the epidemic impacting shopping behaviour -- for instance, consumers want to avoid crowds -- online services are expected to continue growing and draw new customers.

In terms of investor sentiment and the stock market, the epidemic actually provides ample opportunity.

Andy Ho, managing director and chief investment officer of VinaCapital, said: “Investors are looking for a reason to be ‘risk-on’. Though there is a sense of over caution, the Viet Nam stock markets have not had to endure a significant decline.

As soon as the epidemic is under control, “we expect capital markets around the world including Viet Nam to recover and possibly surpass levels seen at year-end 2019”.

Bao Nguyen, president of the Canadian Chamber of Commerce in Viet Nam, said the country remains a fantastic business destination that deserves all the growing attention it is getting around the globe.

The report, which surveyed 242 CEOs, managing directors and business owners, among others, was compiled by Infocus Mekong Research, a market research service provider based in Viet Nam. — VNS

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