COVID-19: Biggest Threat to Business Growth Potential

10:49:00 AM | 11/9/2021

Given negative COVID-19 pandemic developments, businesses will continue to face numerous business difficulties in the domestic market and obstacles to import and export activities with other countries, according to Vietnam Report.

Data from PROFIT500 Ranking - the list of the 500 most profitable companies in Vietnam in 2021 showed that 53.1% of 339 listed companies maintained profit growth momentum in 2019 - 2020 and the first six months of 2021. Besides, 24.4% started to recover and regain profit growth momentums in the first six months of 2021 and 14.2% of them witnessed slowing and declining profit in this six-month period as compared to a year-ago period. The remaining 8.3% had slow profit recovery as they witnessed two consecutive periods of year-on-year profit decline, in 2020 and in the first 6 months of 2021.

Difficulties in personnel, remote operation and supply chains

In a survey conducted by Vietnam Report in August 2021, PROFIT500 companies faced huge challenges due to the 4th COVID-19 pandemic outbreak, mainly resulting from insufficient production personnel caused by physical distancing regulations; difficulty in remote operation and administration; supply chain disruption; decreased purchasing power and increased input price.

Although corporate profit performance was positive in the second quarter, the 4th prolonged and dangerous outbreak of the COVID-19 pandemic significantly reduced profitability in the third quarter as large-scale social distancing measures disrupted recovery momentum. Growth prospects of many industries were challenged when at least 70% of southern manufacturing factories had to suspend operations as a result of lockdowns. For factories still in operation, they had to ensure all mandatory requirements regarding production, distancing and accommodation and test COVID-19 every three days. Therefore, they incurred high operating costs while shrinking their working capacity by 40-50%. Besides, inflation risks still exist from now until the end of the year.

Experts pointed out that the 4th wave of the COVID-19 outbreak has caused numerous difficulties for the economy to date. Vietnam's GDP was estimated to decrease by 6.17% year on year in the third quarter of 2021, the deepest decline since Vietnam announced the quarterly GDP. According to an updated report of the World Bank (WB), Vietnam's growth was estimated at 2-2.5% this year, significantly lower than its forecast of 4.8% in September. This new forecast was based on a deep decline in third-quarter GDP and a strong economic recovery in the fourth quarter when the two economic locomotives of Hanoi and Ho Chi Minh City are gradually lifting restrictions.

Priority strategies in the last months of 2021

According to the PROFIT500 report, the strategic priorities of enterprises in the last months of 2021 have changed a lot as compared to the survey conducted by Vietnam Report in August 2020. Accordingly, their priority strategies are to increase profitability in the last months of 2021: Strengthening PR activity and exercising social responsibility; increasing revenue by driving sales through enhancing customer service, increasing discounts/promotions, seeking and expanding markets, researching and developing new products; developing high-quality human resources and increasing labor productivity; cutting costs by regular budget monitoring and performance reviews; and digital transformation application.

Notably, strengthening PR and exercising activity are new factors in top priority strategies this year and are assigned the top position. This is proven in practice. Despite many difficulties and obstacles caused by the pandemic, businesses have joined hands to support the Government in the fight against COVID-19. They have raised their sense of responsibility to society, created a positive image and enhanced their reputation in the hearts of customers and partners. Furthermore, instead of reducing costs by staff downsizing as seen in last year's survey, in 2021, PROFIT500 companies focused on implementing the core strategy of increasing productivity and workforce quality in addition to digital transformation application and regularly assessing operational efficiency in a close and timely manner.

The biggest difficulty for businesses today is the COVID-19 pandemic. Therefore, PROFIT500 companies believed that quick pandemic control is a decisive factor for Vietnamese business recovery and growth. At the same time, the Government also needs to pay attention to fiscal and monetary policies to stabilize the macroeconomy and control inflation. Regarding fiscal policy, accelerating public investment disbursement will help stimulate aggregate demand and create momentums for economic growth. Besides, together with an active and flexible monetary policy, it is essential to reduce lending interest rates, loosen and allow debt restructuring to support businesses to overcome difficulties. Furthermore, the government should continue to adopt urgent solutions to deal with emerging hardships for them, including support to cut and extend tax payment; minimize procedures to help them access support packages and enhance digital transformation application; and foster delivery of public services and administrative procedures in the digital space.

By Anh Mai, Vietnam Business Forum