World Economy
0

Vietnam Outlook Positive

Vietnam Outlook Positive
Vietnam Outlook Positive

Fitch Ratings on Thursday revised its outlook on Vietnam’s long-term foreign and local currency issuer default ratings to positive from stable and affirmed the ratings at “BB-.”

The credit rating agency said Vietnam’s ratings reflected strong growth performance and prospects, persistent current account surpluses, manageable debt service costs and sustained foreign direct investment inflow. However, the ratings also reflected a high public debt ratio, low foreign-exchange reserve buffers, macro-prudential and banking sector risks and some structural indicators being weaker than those of peers, including per capita income and human development standards, VNA reported.

Policy-making focused on macroeconomic stability had supported strong levels of foreign direct investment and helped maintain robust economic growth, Fitch said.

It cited statistics showing that Vietnam’s real GDP expanded at 6.2% in 2016, supported by the country’s export-oriented manufacturing sector and steady expansion in services, despite weakness in the mining and quarrying sectors from ongoing oil and gas industry downturn.

Fitch forecast that real GDP growth would improve gradually to 6.3% in 2017 and 6.4% in 2018, fuelled by continued FDI inflow into the manufacturing sector and strong private consumption expenditure.

Vietnam’s foreign-exchange reserves also continued to improve to reach $37 billion by the end of 2016, from $28.5 billion in 2015. Government debt continued to rise. Based on preliminary estimate of authorities, government debt to GDP rose from 50.1% at the end of 2015 to 53.4% at the end of 2016. If explicit government guarantees were included, overall public debt reached 63.7%, just short of the official 65% debt ceiling.

Fitch expected that Vietnam would avoid breaching the debt ceiling as the government reaffirmed its commitment to remain within the ceiling through fiscal measures and limits on guarantee issuance. Fiscal deficit was expected to remain close to 5.7% of GDP in 2017-18.

Although Fitch’s banking sector outlook for Vietnam is stable, some challenges remain. The agency believes the large stock of non-performing loans is likely to take time to resolve due to legal impediments and the 2.5% reported system NPL ratio at the end of 2016 understates actual asset quality issues.

Overall credit growth at the end of 2016 was some 18% and the official credit growth target for this year has been capped at 18%.

Moody’s Investors Service late last month also affirmed the government of Vietnam’s B1 issuer and senior unsecured debt ratings and revised the outlook to positive from stable.

 

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com