Fitch raises Vietnam sovereign credit rating to 'BB' from 'BB-'

[BENGALURU] Ratings firm Fitch raised Vietnam's long-term foreign-currency issuer default rating (IDR) to 'BB'from 'BB-', with a stable outlook, the agency said on Tuesday, a move economists said will boost foreign investment into the Southeast Asian economy.

The ratings agency said the upgrade reflects Vietnam's improving policy-making aimed at strengthening macroeconomic performance.

Fitch said it expects Vietnam's gross domestic product to grow 6.7 per cent this year, in line with the government's target. Vietnam reported GDP growth of 6.81 per cent in 2017.

"This is very positive for Vietnamese economy as it shows that macroeconomic stability is further improving," said Can Van Luc, an economist with the Bank for Investment and Development of Vietnam.

Mr Luc said the Fitch upgrade will further boost foreign investment inflows more strongly and that Vietnam will be able to have access to lower-cost funds.

"The country needs cheaper loans from international lenders to support its growth," Luc said.

The government said last month Vietnam plans to borrow 108.03 trillion dong (S$6.33 billion) from foreign sources this year.

The latest Fitch upgrade, which comes at a time of pressure on many emerging market economies and worries about capital outflows, means that there are still two more upgrades needed before Fitch considers them investment grade, to BB+ and then to BBB-.

Fitch however, notes that the banking sector is structurally weak and "weighs heavily on the rating" so there will not necessarily be a smooth path to further upgrades.

REUTERS