Saving remains a priority among Vietnamese consumers but many are increasingly keen to buy products and services they like.
Upon returning from a holiday in Europe that cost her VND70 million ($3,140), which is an impossible dream for many young Vietnamese without help from their family, Ms. Le Thanh Thuy, a 26-year-old office worker who earns VND7 million ($310) a month, was proud to show some photos to her friends. “I had to save two-thirds of my salary for a year to make my dream come true,” she replied when asked how she could afford the trip.
On many online social forums in Vietnam are topics relating to saving money to buy a house, to travel overseas, or to buy a car when you’re on a mid-level salary. Vietnamese people are keen to save and also consume and the economic situation is now well and truly on the mend.
Change in thinking
The latest Asian Development Outlook Update 2015 from the Asian Development Bank (ADB) released on September 22 showed that Vietnam’s economic growth will exceed expectations for 2015 and 2016. In the report the bank revised its forecasts upwards, to 6.5 per cent this year and 6.6 per cent next year.
Similarly, in the East Asia Pacific Economic Update released on October 5, Mr. Sandeep Mahajan, World Bank Chief Economist in Vietnam, wrote that while growth in most countries in the East Asia Pacific region has declined, Vietnam’s growth has gone against the trend. Economic activity in the country continued to firm up in 2015, driven by strengthened domestic demand. GDP accelerated to 6.3 per cent during the first half; the fastest first half growth for five years.
The economic recovery has partially changed the mindset of Vietnamese consumers. A recent report from TNS, a market research and market information group, revealed a close relationship between GDP growth and the Consumer Confidence Index (CCI). Managing Director of TNS Vietnam, Mr. Ashish Kanchan, explained that in 2008 the economy had started to slow down from the 2004-2007 period of golden growth, when consumers had a lot of positive sentiment. This came down sharply in 2009, together with GDP growth.
“From 2010 to 2013 we continuously saw a decline in consumer sentiment as well as the GDP growth rate,” he said. “This was largely owing to the economic conditions in Vietnam over those three years. In 2014 we saw a rebound and it has continued in 2015, where we see consumers have come out of a pessimistic mindset and are more neutral in their sentiment compared to the past.”
According to the recently-released Nielsen Global Survey of Consumer Confidence and Spending Intentions, while consumer confidence across a number of Southeast Asian markets dipped in the third quarter of 2015, in Vietnam it increased slightly, to 105, an increase of 1 percentage point (ppt) quarter-on-quarter and 3 ppts year-on-year, with the country’s population remaining among the Top 10 most optimistic globally.
“Vietnamese consumers continue to show their optimism in the future of Vietnam in terms of the value of the local currency, employment, the cost of living, the economy, and their future living standards,” said Mr. Nguyen Huy Hoang, Business Development Director at Kantar World Panel, an international company dealing in consumer knowledge and insights based on continuous consumer panels. “Specifically, consumers show a strong confidence about Vietnam’s international image, the economy, transportation, and natural disaster prevention in the future.”
The Nielsen report showed that intentions to change spending to save on household expenses continue to be the top priority for Vietnamese consumers. More than eight out of ten (86 per cent) have adjusted their spending habits over the past 12 months to save on household expenses because most think the country is in an economic recession at the moment.
Three out of five Vietnamese consumers (60 per cent) have tried to save on gas and electricity and reduced their spending on out-of-home entertainment compared with this time last year. Around half of Vietnamese consumers have cut down on new clothes (56 per cent) and telephone costs (47 per cent).
“Our research shows that in 2015 monthly savings have picked up slightly,” Mr. Kanchan said. “Comparing monthly expenditures to savings, in 2015 consumers are saving about 21 per cent and spending 79 per cent, the same levels as in 2008, with a higher savings level than in 2011 and 2014, during which monthly savings were 17 per cent and 14 per cent, respectively.”
It seems that the shadow of the economic crisis in 2008 and afterwards still has a strong impact on Vietnamese consumers’ behavior. “Consumers in the north tend to save more than consumers in the south, with the key reason for the overall increase being a mindset to save more for rainy days,” Mr. Hoang expla