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Fitch Upgrades Vietnam to 'BB'; Outlook Stable

Fitch Upgrades Vietnam to 'BB'; Outlook Stable

Wednesday 16, 10 2019
Fitch Ratings has upgraded Vietnam's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB' from 'BB-'. The Outlook is Stable.
Fitch Ratings has upgraded Vietnam's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB' from 'BB-'. The Outlook is Stable.

KEY RATING DRIVERS

Vietnam government’s policy focused on promoting macroeconomic:
1. GDP growth accelerated to 6.8% in 2017, up 0.6% over 2016 due to the focus on export-oriented manufacturing sector and services.
Vietnam's five-year average real GDP growth at the end of 2017 was 6.2%, exceeding the "BB" average of 3.4%.

2. FDI inflows remained increasing in 2017 with total registered capital up about 40% from last year to USD21.3 billion, mainly coming from the manufacturing sector. Accordingly, Fitch estimated that Vietnam would remain among the fastest-growing economies in the Asia-Pacific region, and the fastest among the "BB" rated peers.

3. Vietnam's foreign exchange has improved with 2017 reserves rising to $ 49 billion from $ 37 billion by the end of 2016 due to large capital flows and a current account surplus.

4. Total government debt, according to Fitch, fell to 52.4% of GDP in 2017 from 53.4% in 2016 and government guarantees fell to 9% of GDP by the end of 2017. As a result, Vietnam's public debt (general government debt including guarantees) fell to 61.4% of GDP by the end of 2017 from 63.6% at the end of 2016, and remained below the allowable debt ceiling of 65% of GDP. Public debt is reduced thanks to the equitization proceeds. The privatisation ("or equitization") programme for 2016-20 aims to raise revenues of VND250 trillion.

FITCH'S FORECAST

Expected growth of 6.7% in 2018 in line with the growth target set by the National Assembly, supported by strong inflows of foreign direct investment (FDI), continued expansion in manufacturing and an increase in private consumption expenditure.

According to Government Finance Statistics (GFS), general government debt is likely to fall further and to decline to under 50% of GDP by 2019, aided by proceeds under the privatisation (or "equitization") programme. The budget deficit in will narrow to around 4.6% of GDP from around 4.7% in 2017.

Although Vietnam has received positive reviews from Fitch, potential risks from the structural weaknesses in the banking sector, SOEs, HDI, ... may have a negative impact on the development of Vietnam's future if there are not right policy.

Souce: Fitchratings
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