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Vietnam to outperform Asian frontier markets: Fitch Ratings

By Hung Le   July 7, 2020 | 07:36 pm PT
Vietnam to outperform Asian frontier markets: Fitch Ratings
A man works in a textile factory in Binh Xuyen District, the northern province of Vinh Phuc on February 19, 2020. Photo by VnExpress/Ngoc Thanh.
Vietnam’s economic resilience amid the coronavirus outbreak will help it stand out among other Asian frontier and emerging markets this year, Fitch says.

The credit rating agency said in a new report that its success in containing the outbreak should support Vietnam’s ‘BB’ sovereign credit rating.

The country was one of only four Fitch-rated economies in the Asia-Pacific region expected to achieve positive economic growth in 2020.

Official data showed its economy expanded by 0.4 percent year-on-year in the second quarter despite the impact of the coronavirus pandemic on tourism and export demand, and this was in line with Fitch’s full-year 2.8 percent growth projection.

But the pace of expansion should accelerate in 2021 as external demand, including tourism exports, recovered, Fitch said.

The government had introduced fiscal stimulus of around VND271 trillion ($11.68 billion), or 3.4 percent of GDP, to help offset the effects of the Covid-19 pandemic. This included tax deferrals, cuts and exemptions, and cash transfers to affected workers and households.

The government debt-to-GDP ratio was expected to rise to around 42 percent in 2020 from 37 percent in 2019, but this was still below the current 59 percent median for ‘BB’ rated countries.

The State Bank of Vietnam had loosened monetary policy to support the economy, but the lower interest-rate environment and state pressure on banks to ease lending terms would weigh on bank profitability.

Vietnam’s GDP growth in the first half fell to a decade-low of 1.81 percent, showing the economy has been severely hit by the coronavirus pandemic.

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