Businesses hope to bounce back next year, but some fear another bottom

The owner of a wood processing firm in the southern Dong Nai Province said though there are now enough orders to work through this month instead of a week at a time because of the upcoming year-end holidays, "the market is still frozen" and these orders are just a "spark."

The company exports products to the U.S., Europe and Australia.

"I don't think businesses can recover soon because global demand is still decreasing in general. It was clearly reflected at exhibitions I have attended in several countries. I can see that the production scale is shrinking."

The company only has half its pre-Covid workforce and output has fallen to 40-50%.

Dinh Hong Ky, vice chairman of the Ho Chi Minh City Business Association (HUBA), which represents around 16,000 businesses, said the situation is not "very bright" for most industries.

"Orders and demand, especially in HCMC, are still at a very low level. Consumers are still tightening their spending. There are positive signs in some industries, but they are marginal."

Mac Quoc Anh, vice chairman of the Hanoi Association of Small and Medium Enterprises, expressed a similar opinion, saying the recovery has not been as expected.

In Hanoi only light industry, household appliances, healthcare, insurance, and finance are doing well, he said.

They also concurred that most businesses face great difficulties due to low demand both domestically and internationally, which has prevented them from investing further or borrowing money to expand despite cheap credit available from banks.

Many foreign businesses are also cautious.

The European Business Association in Vietnam said though the Business Confidence Index increased slightly in the third quarter from 43.5 points to 45.1, it still remained below the average threshold of 50, which means less than half of European companies operating in Vietnam businesses express optimism regarding economic stabilization and improvement

European businesses’ expectations in terms of revenues and orders for the fourth quarter remain unchanged from the third.

Only 22% and 16% of companies plan to expand and increase investment in the fourth quarter.

HUBA’s Ky said: "My business partners and I are hoping now is the bottom point and things will improve next year. Hopefully there will be a new cycle in 2024 when the housing market warms up."

Pham Ha, chairman of Lux Group, which specializes in luxury cruises, said new policies, especially the recent easing of visa rules, could have a positive outcome in the tourism industry in 2024.

"There has been a recovery."

Tourism is back at 80% of pre-pandemic levels and would fully recover by 2024, he said.

But Vietnam has to compete fiercely with countries in the region, especially Thailand, he said.

"They recovered faster despite opening later than us and their policy is very flexible. They know exactly what tourists want and how to achieve their goals."

The ongoing uncertainty in the market makes businesses worry about another bottom next year before any recovery begins.

Anh said there could be another crisis at the end of the second quarter next year.

"There could still be another bottom because of potential conflicts and risks in the global market."

The Dong Nai wood company owner said: "Only a few businesses have the financial strength to cope with the losses and pay their employees."

The economy has only gone halfway through a W-shaped recovery, which means there would be one more downward slide next year, he added.