Fitch affirms Vietnam's BB+ rating with stable outlook

Fitch affirms Vietnam's BB+ rating with stable outlook

Southeast Asian country's economy estimated to grow 6% - 7% in medium-term, says ratings agency

By Ovunc Kutlu

ISTANBUL (AA) - Fitch Ratings said Friday it affirmed Vietnam's long-term foreign currency issuer default rating at BB+ with a stable outlook.

Vietnam's rating and outlook reflect a strong medium-term growth outlook, while they are supported by sustained foreign direct investment (FDI) inflows, low government debt levels and a favorable external debt profile, according to the rating agency.

Those, however, are balanced against credit weaknesses, underdeveloped policy framework, high leverage in the economy and lower per-capita GDP than peers, it added.

The Southeast Asian country's foreign exchange reserves have improved slightly to $90 billion in January, which partially reflects some return of capital flows and a larger current account surplus, said Fitch.

"We foresee a recovery in exports to sustain a large trade and current account surplus. This underpins a further improvement in reserves, which we forecast to average about three months of current external payment cover over 2024-2026," it said in a statement.

Vietnam's rating can be downgraded if there is a sustained decline in foreign exchange reserves, or a sustained period of higher fiscal deficits that would lead to a failure to stabilize government debt over the medium-term.

The rating can see an upgrade if there is a significant reduction in risks associated with liabilities, or there is a high economic growth without economic vulnerabilities.

Fitch forecasts Vietnam's economy to grow 6% - 7% in the medium-term, driven by strong FDI.

"An educated workforce, cost competitiveness and entry into numerous regional and global trade agreements should support continued strong FDI inflows, particularly amid the ongoing global supply-chain diversification," said the statement.

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