Grant Thornton International's International Business Report Q3 24

The most recent International Business Review (“IBR”) data from Grant Thornton International reveals a remarkable rise in mid-market optimism, now surpassing pre-COVID levels and reaching the highest point since the IBR began.

Optimism among mid-market business leaders has reached a record high with 74% optimistic about the outlook over the next 12 months (up three points from Q2 2024), according to Grant Thornton's latest IBR.

This increase in confidence appears to be driven by a drop in concerns about business constraints. Although economic uncertainty remains the top concern for 52% of business leaders, this fell by three points compared to last quarter. Concern about energy costs also saw a notable decline, dropping four points to 50%. And there was a six-point drop (to 43%) in concerns over geopolitical disruptions (at the time of the survey).

Concerns over the availability and cost of raw materials dropped three points to 49%, while concerns about labour costs fell two points to 49%.

Interest rate cuts by the European Central Bank (ECB), the Bank of England, and the US Federal Reserve have also improved the outlook for the mid-market, leading to a sharp decrease in concerns over shortage of finance down to 41% from 45% last quarter.

With concern over the impact of many risks receding and predictions of a recession, in some markets, failing to materialise, a record number of business leaders are expecting increased profitability over the next 12 months (up one point to 67%). Mid-market businesses are also expecting higher revenues (up one point to 65%) and to increase employment (up two points to 57%).

Despite ongoing geopolitical tensions, concerns about the impact of these on the mid-market have eased. The overall increase in optimism is also clearly tied to international markets, with a record number of businesses expecting to increase revenue from non-domestic markets (up three points to 51%). Additionally, a record 50% anticipate expanding the number of countries they sell to (up one point), while 40% expect to increase the number of employees focused on non-domestic markets (up two points).

In contrast, marginally fewer businesses expect to increase exports (down one point to 52%) or raise their selling prices over the next 12 months (down one point to 54%). With record high optimism and profitability set against the backdrop of falling interest rates, business leaders are now thinking carefully about where to deploy their capital. The number one investment choice in our survey was information technology, with a record 69% planning to increase spending (up two points).

Research and development has remained at a steady high, with a record 61% of respondents expecting to increase investment (up one point).

Investment in people follows closely, with 60% of businesses planning workforce increases (up one point), reinforcing the belief that, despite the rise of generative AI, a skilled workforce remains vital.). Meanwhile, sustainable initiatives remain at a steady high, with 58% of leaders intending to boost investment in this area.

So how does Vietnam compare to the global averages and ASEAN?

In terms of optimism Vietnam was above the global average by 3 points at 80% registering an increase of 3%points, whilst ASEAN showed a drop of 1 point to 73%.

When asked about concerns over economic uncertainty globally the concern fell by 3 points to 52%, whilst ASEAN increased by 2 points to 52%, Vietnam respondents recorded an increasing concern rising 52% to 60%. Another major concern over the last 2-3 years has been energy costs, which globally fell from 54% to 50%, whilst the level of concern, in Vietnam fell 7 points to 50%, compared to a 2point fall in ASEAN to 45%. Whilst concerns over geopolitical disruptions fell globally from 49% to 43% they fell by 7 points in Vietnam to 32% compared to a fall of 2 points in ASEAN to 38%.

As regards other concerns such as cost of raw materials globally concerns fell 3 points to 49%, and in ASEAN they fell 5% to 55% whilst these concerns fell by a massive 18 points in Vietnam to 42%. On the question of concerns over labour costs, whilst concerns fell from 51% to 49% globally and increased by 1% in ASEAN, they fell by 5% to 36% in Vietnam. When looking at concerns over the shortage of finance they fell globally by 4 points, whilst they increased by 4 points in Vietnam to 41% and by 3 points in ASEAN to 39% possibly indicating that a majority of ASEAN countries are not closely aligned in their interest rate policies to USA and Europe.

Turning to expectations Vietnam ranked the highest globally in the fields of increased profitability, higher revenue, increase in employment and increase in revenue from non-domestic markets. This is probably due, at least in part to the high growth rate of 7.3% recorded in Q3 24, and expectations of a gradual return to normal business operations, with the recent political changes. On the question of profitability expectations in Vietnam rose 4 points to 94% compared to a fall of 3% in ASEAN to 69% and an increase of 1% globally to 67%. On the question of higher revenue Vietnam soared 15 points to 97% compared to an increase of 2% in ASEAN and a 1% increase globally. Another major difference in expectations in Vietnam is the expected increase in employment which rose 10 points to 77% compared to a 2 point increase globally to 57% and a fall of 4% in ASEAN to 57%.?

Another standout for Vietnam is the expected increase in revenue from non- domestic markets where Vietnam rose 16 points to 78% compared to a 5 points rise in ASEAN to 61% and a 3 points increase globally to 51%.

However, when questioned about expectations of an increase in exports Vietnam surprisingly showed a fall of 1point to 65% compared to a fall of 1 point to 52% globally and a 2% fall in ASEAN to 61%. On the other hand Vietnam’s expectations of a 5% increase in selling prices up 5 points to 57% compared to a 1 point decrease globally to 54% and 5 point decline in ASEAN to 56% paints a somewhat different picture.

In terms of investment choices on the back of increased revenues and profitability investment in technology was a leading segment with Vietnam ranking in the top 4 globally with 80% up 5 points compared to 69% globally (up 2 points)? and a static 73% in ASEAN. Whilst investment in sustainability was static globally at 58$ and falling 3 points in ASEAN to 63% Vietnam registered a fall of 8 points to 70. On the other hand Vietnam recorded a 5 point increase in spending on R & D to 80% whilst it increased globally by 1 point to 61% and fell 6 points to 61% in ASEAN.

All in all the survey results for Vietnam reflect both the resilience and creativity of Vietnamese businesses, during what has been for several sectors of the economy, a difficult 9 months, the expectations of a continuing high GDP growth in 2025 and beyond, a? return of consumer confidence driven in part by an expected? revival in the residential real? estate market early next year, which is a great barometer of consumer and investor confidence in the local market, and record levels of FDI continuing to flow into Vietnam.

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Kenneth Atkinson OBE Founder & Senior Board Adviser