Fitch Ratings Upgrades Vietnam

November 7, 2014 Posted by Vietnam Briefing Reading Time: 4 minutes

HCMC – The credit rating agency Fitch Ratings has upgraded Vietnam to “BB-” due to improvements in the country’s economy and finances. The news comes at an opportune time as Vietnam is preparing for the issuance of a sovereign bond. Vietnam has already seen its credit rating upgraded by Moody’s Investor Services and Standard and Poor’s.

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In a statement explaining the upgrade, Fitch stated “Vietnam’s macroeconomic policy mix has moved towards policies aimed at achieving macroeconomic stability…Macroeconomic stabilization 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.”

Fitch also pointed to the Vietnam central bank’s policy of tightening its monetary stance, which has lead to a slowdown in credit growth, increasing economic growth, and moderate inflation. In fact, inflation could be under four percent for this year.

Fitch has also upgraded the ratings of two Vietnamese banks: Vietnam Bank for Agriculture and Rural Development (Agribank) and Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank). These are the two largest banks in the country and are viewed as among the most systemically important banks in the domestic economy.

However, Vietnam still has much work to do in order to further upgrade its ratings. To their credit, the Vietnam government has clearly recognized this and is working hard to improve the investment environment. Last month, Prime Minister Nguyen Tan Dung told the National Assembly that “Vietnam’s economic growth and fiscal balances have not been sustainable” due to a high government budget deficit, rising debt, and slow growth in domestic demand and lending.

These problems have been largely hidden by Vietnam’s strong growth in manufacturing and exports, but to be truly competitive in the global market, the country will need to address these structural problems at the heart of their economy.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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