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Press Release

Grant Thornton International Business report January 2023

The latest Grant Thornton International Business report for H2 2022 findings globally show that overall business health has declined, as might be anticipated in line with the weakening economic outlook, in many economies with reduced forecasts in economic growth in most of Vietnams’ export markets, Nguyen Chi Trung Managing Partner of Grant Thornton Vietnam commented.

Many economies around the world are preparing for a rather unusual recession. One that is characterised by conditions usually associated with a boom, such as low levels of unemployment (instead of increasing levels) and central banks raising interest rates (instead of cutting them). These unusual characteristics combined with what many commentators expect to be a shallow and short recession, could mean the ‘usual’ response to a recession may not be the right course of action for businesses.

There is no doubt businesses are grappling with what may lie ahead this year. Economic uncertainty and energy costs remain the top concerns globally with 60% of businesses citing them as a constraint to growing their business. This is followed closely by the availability of skilled workers (57%) and labour costs (55%).

Top business concerns globally were inflation and a tight labour market which has led to 82% of businesses saying they expect to increase salaries in the next 12 months. However, there is a clear limit to what businesses can afford, with only 24% of businesses indicating they intend to offer ‘real increases’ over the next 12 months.

Despite these constraints to business growth, the desire among mid-market businesses to expand internationally remains high. The percentage of businesses expecting to increase exports over the next 12 months sees a slight increase to 45%, while 40% expect an increase in revenue from non-domestic markets and 41% expect an increase in the number of countries sold to over the next 12 months.

Overall optimism, in Vietnam reverted to the levels seen in 2021 with the number of respondents expressing optimism for the next 12 months falling 13 percentage points (pp)  from H1 2022 to 75%, but still ranking equal 2nd globally.

Whilst expectations of increasing revenues fell 3 pp to 82% the general sentiment remained fairly strong in most areas, despite the fall from H1 2022. However, only 39% of respondents expected to see an increase in selling prices, the lowest globally, reflecting a decrease of 10 pp from H1 2022.

On the question of exports 71% of respondents expected to see an increase but this was a decline of 9 pp from H1 22 and this theme was also reflected in the fact that whilst 65% of respondents expected to see an increase in employment, this was a fall of 6 pp.

Whilst Vietnam ranked the 3rd place globally, in terms of expectations regarding profitability, 78% of respondents were forecasting an increase this was a 9pp decline from H1 2022. 

With China being Vietnam’s largest trade partner, it was not surprising that the majority of respondents saw China as the highest export growth market, supported by the opening of borders, by China.

In line with the overall growth in Vietnam’s GDP of 8% in 2022 and forecast growth of 6.5 to 7% in 2023, it is not surprising to see companies forecasting continued investment in buildings and plant and machinery. Increases were forecast by 60% and 58% respectively down 6% and 4% respectively.

Overall Vietnamese companies are still committed to skills training and R & D with 63% and 60% of respondents respectively committed to training and R & D, however for R & D this reflected a fall of 14 pp.

Challenges to business are still significant particularly red tape and staff costs up 4 pp and 2 pp respectively. Added to this is the general economic uncertainty as noted by 58% of respondents a slight increase over H1 2022.

With regards to Vietnam specific topics 82% or respondents have plans for ESG and are either auctioning them or planning to action them (55% and 16% respectively).

Whilst 41% of respondents are expecting to increase employment according to the report, 44% of respondents noted that work permits and temporary resident card issuance for foreign employees, were posing significant challenges to employers.

In the area of digital transformation data management and strategy was noted as most important by 54% of respondents,   IT strategy was quoted by 50% of respondents as the major focus, followed by Enterprise Risk Management quoted by 47% of respondents.

“With uncertainty about the only certainty right now – focusing on resilience will be key for all business leaders. The focus on expanding internationally is a sensible hedge against domestic uncertainty – as long as it is properly planned and carefully executed. Hopefully the more significant shocks are now behind us and, as conditions normalise, which they show signs of doing – we all hope 2023 will be the year global markets finally return to some sense of normality.” Said Nguyen Chi Trung.




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