Fitch Upgrades Vietnam Outlook

 

The outlook is revised to stable from positive. The issue ratings on Vietnam's senior unsecured foreign and local currency bonds are also upgraded to 'BB-' from 'B+'. The country ceiling is upgraded to 'BB-' from 'B+' and the short-Term foreign currency IDR is affirmed at 'B'.

 

The upgrade of Vietnam's IDR to 'BB-' reflects the following key rating drivers. The first is improved macroeconomic stability. GDP growth has remained relatively strong at a three-year average of 5.6 percent against a 'BB' range median of 3.7 percent. Inflation has moderated to 3.2 percent as of October 2014, down from an average of 6.6 percent in 2013. High savings and investment rates compared with peers support growth prospects. The second is stronger external balances. Macroeconomic stabilisation has contributed to a sharp turnaround in the current account from a deficit of 3.7 percent in 2010 to a projected surplus of 4.1 percent in 2014. Vietnam is now on track to report its fourth consecutive year of current account surpluses, driven by strong export growth and remittances. Consistent net FDI inflows averaging 4.5 percent of GDP over 2011-2013 have contributed to balance of payments surpluses and modest foreign reserve accumulation. Net foreign debt of 14 percent of GDP is in line with the 'BB' median of 16 percent.

 

This revised rating will be a positive factor for banking system restructuring, SOE reform and foreign debt repayment.