Consumers cut back on spending amid unemployment

Spending in the food and beverage sector started to weaken in the last quarter of 2022, with December sales failing to meet the expectations of many industry insiders, said Lan Nguyen, financial director Golden Gate which operates 22 restaurant chains in Vietnam such as Manwah, Kichi-Kichi and GoGi House.

Trang Tien Plaza in Hanoi on Mar. 2, 2023. Photo by VnExpress/Ngoc Thanh

“The decline was even steeper after Tet as people cut their spending,” she said at a recent forum, referring to the Vietnam’s Lunar New Year holiday which fell in January this year.

Several malls in Hanoi and Ho Chi Minh City (HCMC) these days can be seen with many empty spaces as tenants stopped renting.

A representative of a nationwide retail chain said that sales have dropped about 35% year-on-year, and even on the weekends there have been no noticeable hikes.

Le Huynh Phuong Thuc, CEO of cosmetics retailer Guardian Vietnam, said that although the number of customers remains the same as last year, the value of their purchases has dropped.

“Customers are buying more affordable products” she said. “They seem to be more cautious in their spending.”

Smaller retailers face the same difficulties. Kim Han, a seller of school supplies in HCMC’s District 1, said that her daily revenues have dropped 40% year-on-year as students have been spending less since the beginning of the year.

“Their parents have been cutting back on school supplies,” she said. My family therefore also has to cut back.”

A VnExpress survey of of 1,600 readers between March 11-13 shows that 82% of respondents said they had tightened their spending in the last three months, with 15% of them keeping the same budget while 3% spent more than the previous period.

Sales of goods and services nationwide are still growing, but at a slower rate. Sales grew by 13.2% year-on-year last month, the lowest rate since April last year, according to the General Statistics Office.

The export value in the first two months of this year fell 10.3% year-on-year, with a drop in orders seen across key sectors, which explains why factories have been scaling down their workforce.

Inflation in February was 4.3% year-on-year, against the target of keeping it under 4.5%.

Businesses are expecting a stronger demand in the last quarters of the year.

Kao Sieu Luc, the owner of ABC Bakery, said that it might take months for people to start spending big again.

Tourism, therefore, could play a key role in reviving the economy. In February alone Vietnam welcomed 933,000 foreign tourists, a monthly record-high since Covid-19.

Chinese tourists are set to pour into Vietnam starting March 15 as group tours will be resumed.