Hanoi – Fitch Ratings has revised Vietnam’s outlook to positive from stable, and affirms the country’s Long-Term Foreign-Currency Issuer Default Rating at “BB”.
The revision reflects an improving track record of the Government’s economic management, which is evident in strengthening external buffers from persistent current account surpluses, falling debt levels to high economic growth rate and stable inflation.
Fitch said that the Vietnamese Government’s continued commitment to containing debt levels led to a decline in general government debt to 50.5 percent of GDP in 2018 from a peak of 53 percent in 2016. It expects the ratio to decline further to around 46 percent by 2020.
Meanwhile, the public debt (general government debt including guarantees) has dropped to around 58 percent of GDP by the end of 2018 after being close to the ceiling of 65 percent in 2016.
The decline has been facilitated by a reduction in outstanding government guarantees to around 8 percent of GDP by the end of 2018 from 9.1 percent in the end of 2017. Besides, it has been aided by stable receipts from privatisation of state-owned enterprises, high nominal GDP growth and lower fiscal deficits.
Thanks to policies to stabilise the macroeconomy, GDP growth improved to 7.1 percent in 2018 from 6.8 percent in 2017 while inflation rate remained stable at 3.5 percent.
Fitch forecast Vietnam’s GDP growth at around 6.7 percent in 2019, still within the National Assembly’s target of between 6.6-6.8 percent.
It said that Vietnam’s economic growth is likely to be affected by slowing global growth and the US-China trade tensions. Vietnam would nevertheless remain among the fastest-growing economies in the Asia-Pacific as well as those in the “BB” rating category globally.
Last month, Standard and Poor’s (S&P) Global Ratings raised its long-term sovereign credit rating for Vietnam to “BB” from “BB-“, which is expected to help the country attract more foreign investments into the economy and expand exports. This was the first time S&P upgraded Vietnam’s credit rating since December 2010.