Vietnam’s GDP growth is set to double to 6.1 percent this year, thanks to recovery in domestic demand and strong exports and foreign direct investment inflows, Fitch Ratings said.
The global rating agency affirmed Vietnam’s long-term foreign currency issuer default rating at ‘BB’ with a positive outlook Monday.
“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”.
Economic activity resumed in the fourth quarter of last year as the government switched to a more flexible approach to the pandemic with almost the entire adult population being fully vaccinated.
“We expect the export sector to continue to perform well into the medium term, benefiting from Vietnam’s cost competitiveness, trade diversion from China and implementation of key trade agreements,” Fitch said.
Export-related FDI inflows had not weakened despite the supply disruptions in the third quarter of 2021.
Overall FDI remained strong at $19.7 billion, almost unchanged from 2020.
Fitch has also factored in a gradual resumption of tourism inflows from this year though pandemic-related disruptions remain a significant risk to forecasts.
It expected a gradual appreciation of the dong in line with its expectations of current account surpluses, though the State Bank of Vietnam was likely to intervene in case of excessive currency volatility or if there was significant upward pressure.
But risks to the growth outlook remained, including further pandemic-related shocks and high commodity prices.
Vietnam’s economic prospects remained susceptible to shifts in external demand due to its economy’s high degree of openness.
Last year GDP growth was down to 2.6 percent after falling for a second year in a row.
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