Positive economic outlook

Fitch Ratings has affirmed Vietnam’s long-term foreigncurrency issuer default rating (IDR) at ‘BB’ with a positive outlook.

According to Fitch, the pandemic has had a smaller impact on Vietnam’s public finances than the ‘BB’ median, as early success in containing the pandemic allowed for a restrained fiscal response. “The affirmation reflects continued strong medium-term growth prospects, despite the Covid-19 pandemic and the global economic spillovers from the war in Ukraine, and strong external finance metrics relative to peers,” the credit rating agency said in a report released last week.

“We expect GDP growth to accelerate to 6.1% in 2022 and 6.3% in 2023 from 2.6% in 2021, led by a recovery in domestic demand, strong exports and high FDI inflows, particularly in the manufacturing sector,” Fitch said in the report.

However, the agency noted that risks to its growth outlook remain, including the global economic implications of the war in Ukraine and sanctions on Russia, further pandemic-related shocks and high commodity prices.

According to Fitch, Vietnam’s economic prospects remain susceptible to shifts in external demand due to the economy’s high degree of openness. However, the rating agency expects the export sector to continue to perform well in the medium term, benefiting from Vietnam’s cost competitiveness, trade diversion from China and implementation of key trade agreements.

According to the plan to improve the sovereign credit rating to 2030 approved by Deputy PM Le Minh Khai last week, the Government expects to achieve the credit rating from Baa3 ( by Moody’s standards) or BBB- up ( by S& P and Fitch standards) by 2030, higher than the current Ba3 and BB.