Credit rating agency Fitch Ratings has announced an upgrade of Vietnam's credit rating to BB+ with a "Stable" outlook. This is positive information about Vietnam's macroeconomic prospects.
Specifically, according to Fitch, the latest rating upgrade for Vietnam reflects a positive medium-term outlook, reinforced by foreign direct investment (FDI) flows.
This credit rating agency believes that short-term economic challenges stemming from tensions in the real estate market, declining consumer demand and some policy implementation delays in Vietnam will not affect medium-term growth prospects of the economy because policy measures are expected to control short-term risks.
Fitch's report forecasts that Vietnam's medium-term GDP growth prospects are positive, reaching about 7%/year. Cost competitiveness, a qualified workforce as well as Vietnam's accession to many regional and global free trade agreements help continue to strongly attract FDI inflows in the context of diversifying global supply chain.
In addition, diplomatic relation between Vietnam and the US was upgraded to a comprehensive strategic partnership last September, which can create more favorable conditions for Vietnam's trade activities and FDI attraction.
Vietnam's foreign exchange reserves had increased to 89 billion USD by the end of September 2023 after a sharp decrease in 2022, showing a positive return of capital flows and trade surplus. Fitch expects these reserves to continue to improve, thanks to a widening trade surplus in 2024 and 2025.
Vietnam's foreign debt structure is also favorable because the majority of debt comes from bilateral or multilateral parties. This helps reduce the burden of foreign debt repayment and supports foreign currency liquidity.
Economic growth will help maintain public finances at healthy levels, with government debt forecast to continue to remain lower than peer countries.
In addition, the BB+ rating also points out other factors such as controlled risks in the real estate sector, a large-scale financial system, and appropriate and timely fiscal and monetary policies of the Government.
Fitch also noted a number of challenges for Vietnam's economy such as short-term growth difficulties, lower development indicators compared to countries in the same development segment, etc.
According to Fitch, with the Government continuing to implement supportive policies to stimulate growth and stabilize the macroeconomy, Vietnam's economy will regain growth momentum in the near future.
Source: Fitch, theleader
Compiled by VietnamCredit