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  Home > Vietnam

Fitch Revises Outlook For Việt Nam To Positive

Containers loaded at Sài Gòn Port. Fitch has revised outlook for Việt Nam to positive from stable. - Photo baodautu.vn


 May 20th, 2017  |  08:31 AM  |   1850 views



 Fitch Ratings has revised its outlook on Việt Nam’s long-term foreign and local currency issuer default ratings (IDR) to Positive from Stable and affirmed the ratings at "BB-."

This was stated by the credit rating agency in a press release published on its website on Thursday.

The credit rating agency said Việt Nam’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.

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

It cited statistics showing that Việt Nam’s real GDP expanded at 6.2 per cent 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 per cent in 2017 and 6.4 per cent in 2018, fuelled by continued FDI inflow into the manufacturing sector and strong private consumption expenditure.

Việt Nam’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 per cent at the end of 2015 to 53.4 per cent at the end of 2016. If explicit government guarantees were included, overall public debt reached 63.7 per cent, just short of the official 65 per cent debt ceiling.

Fitch expected that Việt Nam 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 per cent of GDP in 2017-18.

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

“While improving economic performance is likely to support lower NPL formation, a rapid and sustained increase in credit growth poses a risk to financial stability in the medium term,” Fitch said in the press release.

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

Moody’s Investors Service late last month also affirmed the Government of Việt Nam’s B1 issuer and senior unsecured debt ratings and revised the outlook to positive from stable. – VNS





courtesy of VIET NAM NEWS

by Viet Nam News


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