‘HANOI CAN’T SACRIFICE GAINS FOR UPGRADE’
Fitch wants proof macroeconomic stability is more entrenched before considering higher ratings
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.