9-12-2023 (HANOI) Fitch Ratings has upgraded Vietnam’s sovereign credit rating, citing a favorable medium-term growth outlook and bringing the nation closer to achieving investment grade status. The rating agency raised Vietnam’s long-term, foreign currency-denominated debt rating from BB to BB+ with a stable outlook, as stated in a release on Friday.
Fitch explained that the upgrade reflects Vietnam’s positive medium-term growth prospects, which are supported by robust inflows of foreign direct investment. The Vietnamese government has been actively implementing measures to strengthen the economy, with Prime Minister Pham Minh Chinh aiming to restore gross domestic product growth to 6% to 6.5% in 2024, following an estimated 5% growth this year.
Fitch’s projections indicate a medium-term growth rate of approximately 7% for Vietnam, driven by the country’s cost competitiveness, well-educated workforce, and participation in regional and global free-trade agreements. These factors are expected to continue attracting strong foreign investment, particularly as global supply chains diversify.
According to Fitch, foreign-exchange reserves have shown modest improvement, reaching $89 billion by the end of September, following a significant decline in 2022. The agency anticipates further improvement in reserves during 2024-2025.
However, Fitch also highlighted weaknesses in Vietnam’s property sector and slower economic growth, which have resulted in subdued loan demand. Some highly leveraged firms may face refinancing risks as their debt matures. Fitch noted that many banks have not significantly reduced their real estate lending or bond holdings, indicating their intention to refinance eligible borrowers to prevent broader defaults and losses.
