Fitch wants proof macroe­co­nomic sta­bil­ity is more en­trenched be­fore con­sid­er­ing higher rat­ings

New Straits Times - - BUSINESS / WORLD -

VIET­NAM mustn’t sac­ri­fice sta­bil­ity for high­speed growth if it’s to be­come an in­vest­ment­grade econ­omy, warned Fitch Rat­ings.

The rat­ing com­pany wants ev­i­dence that macroe­co­nomic sta­bil­ity is more en­trenched be­fore con­sid­er­ing fur­ther up­grades for Viet­nam, said Stephen Schwartz, head of sov­er­eign rat­ings in Asia Pa­cific for Fitch, which last month lifted the na­tion’s credit score to “BB”.

Fitch is also mon­i­tor­ing ef­forts to ad­dress the econ­omy’s struc­tural weak­nesses, in­clud­ing the re­form of state-owned en­ter­prises and man­age­ment of non-per­form­ing loans.

“The chal­lenge for poli­cies will be to sus­tain high eco­nomic growth with­out sac­ri­fic­ing the gains made in macro sta­bil­ity, which were the ba­sis for our re­cent rat­ing up­grade,” said Schwartz.

“The gov­ern­ment is aware of and mak­ing progress in the key ar­eas of struc­tural weak­nesses and chal­lenges.”

Viet­nam won a sov­er­eign rat­ing up­grade from Fitch last month on ris­ing for­eign-ex­change re­serves and strong growth, putting the na­tion’s long-term, for­eign cur­rency-de­nom­i­nated debt two notches away from in­vest­ment-grade.

The coun­try’s bench­mark VN In­dex has risen four per cent this year, and is on course for a sev­enth year of gains, while the dong has re­mained sta­ble.

Viet­nam has one of the world’s fastest-growing economies af­ter an­nual ex­pan­sion ac­cel­er­ated to 7.4 per cent in the first quar­ter, the most since at least 2005.

The gov­ern­ment wants to main­tain fast growth while keep­ing in­fla­tion un­der con­trol, re­cently tak­ing mea­sures in­clud­ing sub­si­dis­ing ris­ing fuel costs and telling min­istries not to in­crease elec­tric­ity prices.

“In the en­vi­ron­ment of the global mon­e­tary tight­en­ing, the cen­tral banks in Viet­nam and around the re­gion need to stay vig­i­lant”.

“We ex­pect some de­gree of mon­e­tary tight­en­ing from the cen­tral bank in the near term, ei­ther through open-mar­ket-oper­a­tions or through pol­icy in­ter­est rate hikes, given the re­cent build-up in the bank­ing sys­tem’s liq­uid­ity com­bined with rapid credit growth,” said Schwartz.


Fitch lifted Viet­nam’s credit score to ‘BB’ last month. The coun­try is one of the world’s fastest-growing economies af­ter an­nual ex­pan­sion ac­cel­er­ated to 7.4pc in the first quar­ter.

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