Inflation - The torment weighing down businesses

Currently, Vietnam is facing pressures due to high inflation created by external markets and the internal vulnerability. Alongside decreasing consumer demand, slow economic growth, and disruptions in the traditional European market supply chain, inflation is further burdened. Internally, increased financial risks lead to instability in production costs.
To understand how severe inflation affects Vietnam's economy, Dorsati Madani, a senior WB economist in Vietnam, stated: "Prolonged inflation pressure and the possibility of tighter monetary policies, especially in the US and the Eurozone, could cause fluctuations in global financial markets, significantly impacting Vietnam's financial sector."

Supply chains are severely affected, particularly impacting inventory levels. Manufacturing businesses are struggling with excessive inventory, opting for reserves over liquidation. Excessive inventory directly affects companies' revenue and profits as storage costs rise, along with labor and warehouse rental expenses. For perishable goods with short shelf lives, prolonged inventory storage negatively impacts the value of the goods. Failure to timely sell can lead to complete disposal of the batch, resulting in significant losses for businesses, declining revenue and profits, and potential bankruptcy due to the large value of unsold inventory and excessive capital investment.

Two main factors affecting production orders are inventory levels and customer demand. Surplus inventory challenges road transport, leading to fewer containers being transported from ports and reduced goods from warehouses to retail stores. This indicates a decrease in consumer purchases and usage. Businesses, especially manufacturers, are burdened by challenges in costs and capital maintenance. The inventory dilemma is causing business owners headaches as they struggle to find solutions, likely requiring significant time and losses to untangle this knot.