Vietnam succeeds in reducing public debt: Fitch Ratings

The Vietnamese Government succeeded in lowering public debt from 53% of gross domestic product (GDP) in 2016 to 50.5% by late last year, according to Fitch Ratings at a forum in Hanoi on Tuesday.

Partnering with the Hong Kong-based financial magazine for Asia’s decision makers The Asset, the “Fitch on Vietnam” forum gathered investors and leaders to discuss the economic outlook amid the macroeconomic challenges and examine Vietnam’s credit outlook from issuer and market perspectives, reported the Vietnam News Agency.

Representatives from the U.S.-based credit rating agency mentioned the factors needed for this organization to raise its outlook on Vietnam’s “BB” long-term foreign-currency issuer default rating to “positive” from “stable.”

The Government is committed to consolidating its finance sector and curbing public debt, they said.

Fitch predicted that Vietnam’s public debt would continue to drop to some 46% of the GDP by 2020.

The agency also forecast that Vietnam will continue to receive a large amount of foreign direct investment (FDI) in the manufacturing sector, mainly in the electronics segment, thanks to its advantages of low costs and supply chain connectivity.

These positive trends will support stable short-term economic growth, though the global economy is weakening and Vietnam’s high level of trade dependence could affect economic growth this year and next, it said.

This has led Fitch to project that the country’s economic growth will decrease slightly from 7.1% in 2018 to 6.7% this year and next.

This figure is still within the growth target of 6.6%-6.8%, set by the legislative National Assembly, and Vietnam will remain one of the fastest growing economies in the Asia-Pacific region.

The escalating trade war between the United States and China has shifted trade inflows out of China, according to Fitch.

As a result, many companies are moving their manufacturing facilities to Vietnam. However, it will take more time to witness the actual transition of factories from China to Vietnam on a large scale.

Speaking at the event, Vo Huu Hien, deputy director of the Department of Debt Management and External Finance at the Finance Ministry, said that the prospects of Vietnam’s economy in 2019 and 2020 will remain positive, with macroeconomic stability and confidence in investment and the business environment further consolidated.

Hien also pointed out some external challenges that the Vietnamese economy is facing, including its high degree of trade openness.

Given this, the U.S.-China trade dispute will have certain effects on its economy, such as the shift in import and export policies, the avoidance of goods originating from some countries into Vietnam and changes in supply chains and investment flows.

He also expressed hope that Vietnam’s credit rating in the coming period would continue to improve, further lifting its national prestige, reducing the cost of raising capital and easing market access through strengthening the country’s ability to attract investors.


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