Fitch Ratings sanguine about Vietnam

The upgrade reflects Vietnam’s favorable medium-term growth outlook, underpinned by robust foreign direct investment inflows, the U.S.-based rating agency said in a note.

“We have increasing confidence that near-term economic headwinds from property-sector stresses, weak external demand and delays in policy implementation owing to a corruption crackdown are unlikely to affect medium-term macroeconomic prospects.”

Policy buffers are sufficient to manage near-term risks, it said.

Fitch forecast medium-term growth of around 7%.

It said Vietnam’s cost competitiveness, educated workforce relative to peers and entry into regional and global free-trade agreements bode well for continued strong FDI inflows amid a global supply chain diversification.

The country upgraded its ties with the U.S. to a comprehensive strategic partnership in September, which could facilitate greater U.S. FDI and trade.

Foreign exchange reserves improved modestly to $89 billion as of end-September 2023 after a sharp drop in 2022,partly reflecting some return of capital flows and a larger trade surplus.

The country’s external debt composition remains favorable, with bilateral and multilateral borrowing accounting for most of it.

But GDP growth is set to fall from 8% last year to 4.8% this year due to headwinds in the near term owing to a weaker external environment and some spillover to domestic demand from property sector stresses.

But it will likely pick up to 6.3% next year.