Lending rates in several sectors reach up to 15%; HUBA proposes reducing them

Vietstock reported that the Ho Chi Minh City Enterprise Association (HUBA) surveyed Q1-2026 business conditions. Despite macroeconomic instability, many firms believe Q2 will be more favorable due to lagged effects. From late February, affected by the Middle East conflict, Vietnamese businesses faced significant pressures. Fuel and raw material costs, particularly oil-based inputs, rose by 30% to 40%, while export logistics costs more than doubled to triple. Slow cash collection extended working capital cycles, and importing equipment timing uncertainties directly impacted delivery schedules, causing several contracts to be canceled or penalized. Notably, the shipping industry was hit hardest due to disruption of routes through the conflict region. Major shipping lines had to reroute via the Cape of Good Hope, increasing transit times by 10–18 days. Fuel costs and insurance raised freight rates by 30–60%. In air freight, freight charges on routes to the EU and Africa rose 20–40%; the US route rose 10–25%. Overall, systemic risk included volatile freight rates, squeezed profit margins, and higher default risk. The textile and fashion sector also faced logistics cost pressures doubling or tripling. Delivery times lengthened by 14–20 days, challenging the fast-fashion segment with short product life cycles. The exodus of some traditional fashion brands is a structural shock to Vietnam's textile industry. Additionally, when crude oil surpassed $100 per barrel, prices of synthetic fibers and dyes surged. The stronger US dollar also raised import costs, eroding export competitiveness. In the food processing sector, fuel costs pushed up transport and logistics costs by about double, raising production input costs for exporters. Some exporters to the Middle East faced risk of order postponement or cancellation without compensation due to force majeure. HUBA’s Q1-2026 results indicate that small and medium-sized enterprises are relatively optimistic: revenue stability at 86%, profit stability at 75%. Although macro conditions remain unstable, the lagged effects mean 79.5% of firms expect improvement in the next quarter. 91% assessed the investment and business environment in the city as improving, and 86% planned to hire more workers. An accompanying chart shows that 31% of firms faced difficulties due to weakening demand. Recommendations include lowering lending rates below 6% per year for exporters, more flexible credit terms, and extending loan tenors. The association also called for tax relief measures and faster VAT refunds; regulatory checks should adopt risk-based approaches and stronger post-inspection. HUBA urged the city to improve logistics policy with better regional coordination, infrastructure investment, and modern logistics hubs. In the near term, the association suggested exploring tools like cost-stabilization measures for logistics and a logistics support fund. It also recommended accelerating land resource release to enable land conversion where land is no longer suitable for agriculture. Given Ho Chi Minh City's aging population, HUBA suggested promoting a 'silver economy' with a service ecosystem covering healthcare, financial services, travel, and in-home care. It also encouraged firms to develop specialized products and services and to pilot urban models that are elder-friendly, enabling market expansion and growth. The Q1 survey highlighted key difficulties: 54.5% of firms faced pressure from rising input costs; 47.7% cited high borrowing costs; 41% cited higher transportation costs, and 31.8% reported weakened demand.