Fitch revises up Vietnam's credit rating

By Minh Nga   May 19, 2017 | 04:26 pm GMT+7
Fitch revises up Vietnam's credit rating
Laborers work at a garment factory in Hung Yen province, outside Hanoi. Photo by Reuters/Kham

The credit rating agency's outlook has gone from stable to positive.

Fitch Ratings has moved up the outlook on Vietnam's long-term foreign-and local-currency issuer default ratings (IDRs) from stable to positive and affirmed the ratings at ‘BB-’.

The ratings on Vietnam's senior unsecured foreign-and local-currency bonds were also affirmed at 'BB-'. The country ceiling stands at 'BB-' and the short-term foreign-and local-currency IDRs at 'B'.

Vietnam’s ratings reflect strong growth performance and prospects, persistent current account surpluses, manageable debt service costs and sustained foreign direct investment (FDI) inflows.

Explaining its revision of Vietnam’s outlook to positive, the New York-based credit rating agency said the country is building a record of policy-making focused on macroeconomic stability. This approach, which includes greater exchange-rate flexibility and an increasing focus on inflation stability, has supported consistently strong levels of FDI and helped maintain robust economic growth.

Vietnam’s economy expanded by 6.2 percent last year, taking the five-year average gross domestic product (GDP) expansion to 5.9 percent against the 'BB' median of 3.4 percent.

Growth remains supported by the country's export-oriented manufacturing sector and steady expansion in services, despite weakness in the mining and quarrying sectors from the ongoing oil and gas industry downturn.

Fitch expects real GDP growth to improve gradually over the forecast period to 6.3 percent this year and 6.4 percent next, supported by continued FDI inflows into the manufacturing sector and strong private consumption expenditure.

As for the 'BB-' rating, it said Vietnam’s government debt is above the 'BB' median and has continued to rise.

According to preliminary estimates by the authorities, government debt accounted for 53.4 percent of GDP at the end of 2016, rising from 50.1 percent the year before.