The European Chamber of Commerce in Vietnam (Eurocham) has unveiled the latest Business Climate Index (BCI), indicating that European business leaders concluded last year in a more optimistic mood regarding the country’s trade and investment environment than at any other point since the initial outbreak of the novel coronavirus (COVID-19).

In line with this, the BCI climbed six points during the final quarter of 2020 to reach 63.6, ending last year on a high. The index therefore rose by a total of 37 points over the course of last year following a drop to a historic low in the first quarter due to the initial outbreak of COVID-19. Since then, the BCI has been able to maintain positive growth following the country’s successful handling of the pandemic, along with the implementation of the EU-Vietnam Free Trade Agreement (EVFTA) which served to improve confidence whilst boosting business.

When asked about the nation’s economic prospects moving into the next quarter, 57% of EuroCham members anticipate “stabilization and improvement” during the opening three months of the year, a sharp rise in comparison to 39% in the third quarter of 2020, a rise in confidence of 18%.

With regard to the prospects of their own enterprises, European business leaders proved to be far more positive and optimistic in the fourth quarter. One third of EuroCham members predicted a rise in their headcount during the next quarter, with a further 57% expecting to maintain the same level. Meanwhile, 30% anticipate a rise in investment and 43% predict a rise in orders and revenue.

With the EVFTA now in force, EuroCham also polled members on their perceptions of the agreement and its impact on their business operations. Encouragingly 70% said that their business had already benefitted from the EVFTA since the deal came into force on August 1, 2020. Despite this, 33% also said that “administrative procedures” were the main barrier for them to fully utilise the EVFTA, indicating the importance of monitoring the implementation of this agreement.

“Our latest BCI paints a positive picture of Vietnam’s business environment as we look ahead to 2021. The growth in confidence we have seen over the last 12 months is a testament to the government’s swift and effective handling of COVID-19, and creates a strong foundation for the next five years of Vietnam’s socio-economic growth,” said Nicolas Audier, chairman of EuroCham.

“Meanwhile, our members report a positive impact of the EVFTA since it entered into force six months ago. European business leaders are looking forward to the increased trade and investment that the agreement will bring, while also highlighting some of the issues which need to be addressed to ensure its smooth and successful implementation,” he added.

The BCI is a regular barometer of EuroCham members and is a means of gauging the general perceptions of the business environment. Each quarter, it tracks the performance of EuroCham’s member companies, in addition to their thoughts the country’s economic outlook, with the fieldwork and data collection for the BCI being conducted by YouGov Vietnam.