Fitch Rating affirms Vietnam at BB with a positive outlook

31/10/2022

On October 28 2022, Fitch Ratings (Fitch) has affirmed Vietnam’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at “BB” with a Positive Outlook. According to Fitch, Vietnam’s rating reflects its strong medium-term growth prospects, lower government debt compared to peers, and favorable external debt profile. High FDI in manufacturing should continue to support robust growth in the medium term. Fitch predicts growth of Vietnam at 7.4% in 2022, led by the strong gains in industry, construction and services, and partly from base effects. Meanwhile, Fitch forecasts a slowdown in GDP growth, to 6.2% in 2023 from downside risks associated with the effect from the Ukraine war and tighter global funding conditions.

According to Fitch, Vietnam’s economy is vulnerable to external shocks, due to its high degree of trade openness. However, Fitch expects Vietnam’s exports to keep performing well in the medium term, benefitting from Vietnam’s cost competitiveness, trade diversion from China, and implementation of key trade agreements.

Fitch also expects the inflationary pressures to be on the upside. In details, Fitch forecasts the inflation will be at an average of 4.3% in 2022, and remain at about 4% in 2023 and 2024, amid the elevated commodity prices and exchange rates pressure.