Context and the economic effects

 2019 was a great year for German-Vietnamese business relations, as Vietnam had a trade volume of around 14 billion EUR with Germany - Germany's second most important trading partner in the ASEAN region and there are more than 350 German FDI projects here. 2020 would be a very challenging year for the global economy, as the COVID-19 epidemic continued to be unpredictable and increasingly widespread worldwide, also in Vietnam, even Vietnam has responded well to the Covid-19 epidemic from the very outset, preventing its spread. In fact, the coronavirus is a serious challenge for our whole society and for the German investors here.

Source: German Industry and Commerce in Vietnam

According to the survey, 43 percent of German companies are already feeling the effects that the coronavirus pandemic will have on the Vietnamese economy in the middle term, despite favourable prospects for the Vietnamese economy. Nearly 20 percent think that Vietnam’s economy could even be better despite of this epidemic in the mid-term.

Implementing the aid packages is essential for Vietnam to mitigate the impact of the coronavirus. It shows that Vietnamese government has taken decisive and forceful action against the impact of the corona crisis immediately. If these measures should be taken as fast as possible to counter the economic impact of the coronavirus, in order to bring the economy back onto a growth path as quickly as possible.

Business situation and expectation

Many companies have been feeling the initial impact of the virus. Cancellation of the trade fairs and large-scale events, and the decline in travel, are affecting the service sector, especially in the areas of logistics, trade, gastronomy and tourism. At the same time, foreign demand is dropping, and international supply chains are being disrupted. 14 percent of German companies estimate their business performance to be weakened in 2020. 59 percent expect that their company’s operations and financial position will be stable this year.

Only 27 percent rate their current business situation in Vietnam as good in 2020 (77 percent in 2019). Compared with other German firms in ASEAN, the German community in Vietnam has the optimistic perspective and expectation in the upcoming year, two-third of respondents believed that their business situation will stable and even be getting better in 2021.

Coronavirus crisis and the economic consequences for German businesses in Vietnam

Under these circumstances, German companies’ revenue expectation droped due to the coronavirus significantly. According to our survey, 82 percent report adjusting revenue targets downward due to the coronavirus. 9 percent have serious problems and expected a significant decline of more than 50%. 63 percent of them calculated with loss of 10% to
50%.

Due to the survey result, almost German companies in Vietnam have already experienced how the epidemic effected their business activities since the coronavirus expanded. They have been feeling the initial impact of the virus, especially because of the travel restrictions (86 percent). 59 percent of German companies reported coronavirus has disrupted their supply chains. 55 percent of firms are experiencing cancellation of contracts, and 50 percent are rescheduling their new investment intensions due to the outbreak of coronavirus.

Investment and employment intentions

Due to the survey, 72 percent of German companies in Vietnam intend to keep investing in Vietnam and 27 percent assume an increase in employment. As a result of the fact that the Vietnamese government shows the commitment create the most favorable conditions for foreign investors and businesses as well as the upcoming the FTA between EU and Vietnam, which probably comes into effect this summer, will boost the economic growth of this country and attract more investors to Vietnam. German companies expected EVFTA and EVIPA would improve the economic policy in Vietnam in the long run. They could enjoy protection of investments with trade facilitations and increase investments in Vietnam. For the mid-term, there will be many FDI flows for high-valued projects into Vietnam. German investors would bring their well-known technology in management and training to this country, allow more value-added production, less waste of material and resources.

Demand and economy policy create uncertainty in Vietnam

Concernings about the demand and the economic policy framework are still increasing this year. Many companies (68 percent) think that they’ve been taken a big hit in 2020 from the coronavirus with a major decrease in demand. After 51 percent in 2019, 59 percent of companies city economic policy as one of the great factors of uncertainty for their businesses in 2019 in Vietnam. Another issues such as financing, infrastructure and lack of skilled workers might threaten their businesses here./.

Khac Kien